Retail sector slumps as business sales continue to record weak performance

  • Business Sales Indicator eases by 0.2 per cent in trend terms in April
  • Retail stores records biggest fall in sales, down 1.4%
  • Four of the 20 industry sectors record weaker sales in April
  • Sales in ACT and NT stronger; NSW weakens further followed by QLD

19 May 2011: Retail sales slumped by 1.4% in April, the biggest fall of all industry sectors recorded, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

The BSI is a key measure of economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, a sample of approximately 40% (the largest share) of the Australian market. The BSI fell by 0.2 per cent in trend terms in April.

The weakness in Retail Stores is further highlighted when the sector is removed from the broader BSI results. Excluding Retail Stores, the BSI recorded a 0.3 per cent gain in April, a similar rise to March and the strongest gain since November 2009.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest results were a clear demonstration of the patchy performance of the Australian economy.

“The retail sector is clearly struggling,” said Mr Comyn.

“Whilst the difficulty being faced by the sector is nothing new, this latest result is yet another blow for an industry which is facing a growing set of challenges. Online retailing is becoming increasingly prevalent, affecting the traditional retailing model. This is being compounded by the effects of a strong Australian dollar and consumers who are still unwilling to spend.”

Despite the uphill battle, Mr Comyn added that the positive performance of a number of other sectors continued to be encouraging.

“Over the past six months, the number of sectors recording weaker spending growth has remained fairly consistent. In April we saw only four sectors contract which is good news.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that while the latest figures may have been affected by the late arrival and extended Easter period, overall performance was still markedly off where it had been two years ago.

“Conservatism is still clearly the word of choice when it comes to the Australian consumer,” said Mr James.

“Mums and Dads throughout Australia were spared additional hardship thanks to the delivery of a softer Federal Budget, however we don’t yet know what the full impact of this will be on their overall level of confidence. With the prospect of two additional rate rises over the remainder of 2011, it wouldn’t be surprising if sales continued to trudge along at this pace for some time to come.”

Industry analysis – Amusement & Entertainment continues to post positive gains

The strongest lift in spending in trend terms was once again in the Amusement & Entertainment sector (includes motion picture theatres, bowling alleys, golf courses and video stores), up 1.2 per cent, followed by Clothing Stores and Utilities (both up 0.9 per cent).

In addition to Retail Stores, Mail Order & Telephone Order Providers recorded negative growth (down 1.3 per cent), followed by Automobiles & Vehicle sales (includes services stations as well as car and boat dealers, tyre and auto parts stores) which was again weaker, with sales down 0.4 per cent.

State / Territory analysis – NSW weakest

Five of the states and territories recorded weaker sales in trend terms in April, a similar result to March. The weakest result was in NSW (down 2.1 per cent), followed by Queensland (down 1.1 per cent) and South Australia (down 0.8 per cent). The latest results show a significant deterioration in spending in NSW in the past four months.

The strongest performance was recorded in the ACT (up 0.5 per cent), followed by Northern Territory (up 0.2 per cent) and Tasmania (up 0.1 per cent). The ACT and Northern Territory have both risen for the past six months.

“There are clearly those States and industries that are continuing to post positive gains, showing that we are seeing a recovery in limited areas of the Australian economy,” said Mr James. “May sales figures released next month should also give us some clues as to how the Australian public has taken to the latest Federal Budget and what’s in store as we head into the end of the financial year.”

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About the Commonwealth Bank Business Sales Indicator

  • The Commonwealth Bank Business Sales Indicator is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia (approximately 30 – 40 per cent of the market).
  • The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy (covering 20 industry sectors and all Australian states and territories) and is available to the public on the Bank’s website and to the media on or around the 20th day of each month.
  • Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
  • The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.
  • The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.
  • The Business Sales Indicator includes industry sectors based on the International Merchant Category Code (MCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment. Refer to Table 1 for the MCC listing.