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June sales weakest since global financial crisis

EMBARGOED UNTIL: 0.00 Hours 20 July 2010: Spending across the economy decreased over the month of June, according to the latest Commonwealth BankBusiness Sales Indicator (BSI)(i).

During June, the BSI, which tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, declined 0.3 per cent in trend terms, the fourth consecutive monthly fall. In annual growth terms, the BSI slowed to 0.7 per cent, which was the slowest growth pace in 17 months.

According to Executive General Manager of Local Business Banking at the Commonwealth Bank, Symon Brewis-Weston, the decline in spending suggests that consumers have cautiously moved to the sidelines and will probably stay there until the end of the year.

“Consumers jumped out of the blocks late last year and boosted sales across the nation, but that’s now been tempered by a fear of higher interest rates and the hit to budget from increased utility charges and local council rates.

“That said, underlying market fundamentals seem strong, with the job market improving and wages trending higher. This should lead to an upturn in sales towards the festive season,” said Mr Brewis-Weston.

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said the latest spending figures are a concern for business owners and should not be ignored by the Reserve Bank.

“The Reserve Bank can’t ignore recent trends – the economy has lost some momentum and the slowdown in spending has been a key driver of the weakening trend. The Reserve Bank would need solid justification from a higher inflation reading to lift rates in the next few months.

“Hopefully the sharp lift in consumer confidence that has occurred in the last few weeks will bring more people back into the shops in coming months,” said Mr James.


Industry analysis – consumers repair rather than replace

Of the 20 industries tracked in the BSI, spending was strongest in the service providers sector, rising 0.8 per cent over the month of June (in trend terms). Spending at amusement and entertainment outlets increased by 0.6 per cent over the month, supporting the view that consumers remain conservative and are embracing ‘little luxuries’.

STRONGEST INDUSTRIES

+ 0.8%

Service providers

+ 0.6%

Amusement and entertainment


The weakest sectors in June were mail order and telephone order providers, down 2.8 per cent in trend terms, automobiles and vehicles, down 2.6 per cent and retail stores, down 1.7 per cent.


State/Territory analysis – Tasmania weakest state

The BSI found that five of the eight states and territories recorded a fall in sales in June. Spending was weakest in Tasmania, down 0.9 per cent, followed by Queensland and New South Wales, both down 0.2 per cent). Defying the downward trend was Western Australia (up 0.4 per cent) and the Northern Territory (up 0.2 per cent).


Contact:

Kate Powditch
Commonwealth Bank
Phone: (02) 9118 1667
Email: Kathryn.powditch@cba.com.au

 

i. About the Commonwealth Bank Business Sales Indicator

  • The Business Sales Indicator is calculated by tracking credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia (approximately 30 – 40 per cent of market).
  • The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy and is available to the public on the Bank’s website and to the media on or around the 20th day of each month.
  • Currently, the main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. The main quarterly indicator of spending in the economy is the ABS Household Final Consumption Expenditure (HFCE). A quarterly measure of the Business Sales Indicator has closely tracked the ABS household consumption series over the past three years, highlighting the value of the Business Sales Indicator to track changes in spending across the economy. The Business Sales Indicator is available monthly; broader household consumption figures are only available from the ABS on a quarterly basis.
  • The Business Sales Indicator includes industry sectors based on international Merchant Category Code (MCC) categories.