Business suffers as consumers continue to rein in spending
- Business Sales Indicator falls by 0.3 per cent in trend terms
- Weakness remains concentrated in retail sector; Amusement & Entertainment continues to gain ground
- Four of the 20 industry sectors contract in June
- ACT and WA sales figures up; NSW and SA slip again
EMBARGOED UNTIL 00.01 hours 20 July 2011: The pain being felt by retailers looks set to continue following another disappointing fall in June sales figures, 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 30% of the Australian market. The BSI fell by 0.3% in June, following a 0.4% decline in May.
According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest results were a further sign of the tough conditions facing a number of businesses throughout the country.
“The level of negative sentiment we are seeing amongst consumers is definitely worrying and the latest BSI is proof that this sombre mood is hurting businesses,” said Mr Comyn.
“Although we haven’t seen any movement on the interest rate front, it’s clear that consumers continue to be rattled by both developments at home and abroad. The fact that we didn’t see an increase in purchases at retail stores during a heavy discount period is further proof of that.”
“However as we have seen in past couple of months, the news isn’t all bad. Only four sectors contracted in June and the State picture is also better this month. Four states recorded weaker sales, down from six in May, and we’re seeing some definite shining lights such as the ACT which has shown consistent growth over the last nine months.”
Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that the June figures showed that recent optimism had clearly turned out to be a mirage.
“The BSI had been recording improvement from July 2010 however there has been a sharp reversal of the fortunes of the retail sector over the past two months,” said Mr James.
“Consumer sentiment, affected by domestic and international developments, is no doubt one of the key factors fuelling the decline in sales and although the State picture is mixed, there is definitely a rocky road ahead.”
Industry analysis – weakness remains narrowly based
The majority of industry sectors are still recording spending growth in trend terms, a similar result to both April and May. Only four of the 20 sectors reported weaker spending in trend terms in June, with Automobiles & Vehicles down 2.0 per cent and Retail stores falling by 0.9 per cent. Spending at Miscellaneous Stores fell 0.6 per cent in June with Automobile/Vehicle Rentals down 0.4 per cent.
Amusement & Entertainment (includes motion picture theatres, bowling alleys, golf courses and video stores) continued its strong run, up 1.3 per cent, followed by Clothing stores (up 1.1 per cent). Both sectors were again likely beneficiaries of the colder weather which helped drive consumers indoors and to purchase warmer clothing. Contracted Services (includes building trades such as electricians as well as veterinary services) was also up, recording a 0.7 per cent increase.
State / Territory analysis – NSW continues to lag while ACT powers ahead
Four of the states and territories recorded weaker sales in trend terms in June, down from six in May. The weakest result was in NSW (down 1.5 per cent), followed by South Australia (down 0.9 per cent), Queensland (down 0.9 per cent) and Victoria (down 0.3 per cent).
The ACT was the stand-out performer in June (up 1.3 per cent) followed by Western Australia and Northern Territory (both up 0.1 per cent). The ACT has shown consistent growth over the past nine months. In contrast, sales in South Australia have consistently softened over the past 18 months.
“Whilst the June figures are far from positive, they have also highlighted that some sectors have suffered from external factors such as the recent disaster in Japan,” said Mr James. “As a result, this short-term negative performance should improve in the coming months, particularly for sectors such as Automobiles & Vehicles where we see a more positive outlook.”
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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 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.