After months of depressing retail sales data, figures from the Commonwealth Bank show consumer spending may finally be starting to stabilise, with the bank’s Business Sales Indicator now showing the largest annual gain in more than two years.
Retailers have applauded the Reserve Bank for cutting interest rates to 3.5%, but economists have warned it may take some time for the effects to flow through.
The latest BSI suggests this may be happening – although economist Craig James warns this is only the beginning, given the financial turmoil in Europe is still ongoing.
“Consumer confidence is still fragile, due mainly to international factors and general uncertainty about a number of domestic economic issues. So while spending is continuing to rise, there is still uncertainty about whether momentum will be maintained.
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“The good news is that interest rates have been cut twice in two months. If the international environment settles and wider fears are allayed, then the outlook for consumer spending would markedly improve.”
The BSI, which measures the value of credit and debit transactions across the Commonwealth Bank’s network, recorded a 1.9% increase, seasonally adjusted, in May. That means sales have risen three times in the past four months, and spending is up 5.9% from this time last year – the largest gain in two years.
Broken down into state-specific results, the message gets even better – Queensland has recorded an 11th consecutive month of gains, while spending has also increased in South Australia, New South Wales, West Australia and Victoria for 10 consecutive months.
Five industry sectors fell, however, compared to just four in March and April. Clothing stores fell 0.7%, while automobile and vehicle rentals, along with professional services and membership organisations, both fell by 0.2%.
The strongest sales were in wholesale distributors and manufacturing, up 2.7%, while amusement and entertainment rose 1.8%, mail order and telephone providers were up 1.5%, along with contracted services up 1.1%, and service providers up 1%.
In annual terms, hotels and motels are down 6.7%, vehicle rentals and automobiles are down 0.6% as well, while amusement and entertainment is up a solid 21.2%, followed by mail order and telephone order providers up 16.7%.
And over the past year, retail stores are up 12.2%
Matt Comyn, the Commonwealth Bank’s executive general manager of local business banking, said the results show an encouraging, improving environment.
“The results recorded in May are therefore promising for Aussie businesses – particularly based on other positive news for the economy this month – and point towards what is hoped to be continued growth in consumer spending. However, the overall story hasn’t changed and despite stronger fundamentals at home, rocky overseas markets are continuing to dent local consumer confidence.”
However, there are still some weaknesses in the states – Tasmanian sales dropped 0.4%, while the Northern Territory recorded a 0.1% fall.