Weakness spreads across business sales as conditions remain subdued
Business sales deteriorated further in July as the lacklustre performance in retail spending spread across the Australian economy, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
- (1888PressRelease) August 19, 2011 - 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 July, following a 0.5% decline in June.
According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest figures further highlighted how low consumer confidence was taking its toll on the Australian economy.
“We are now seeing signs of a broader fallout from continued subdued trading conditions, where a lack of consumer spending is starting to affect a wider set of businesses, not just those in the retail sector,” said Mr Comyn.
“The challenges we have been facing are nothing new, however the longer-term impact is starting to become apparent across the business landscape. Current financial market uncertainty isn’t likely to help the situation so it looks as if this weakness will remain until we see some more positive sentiment in the local economy.”
“Despite the over-arching negative results, this month we actually saw a 0.1% increase in spending in the retail sector which is a definite positive and we’ve also seen pockets of the economy continue to perform including ACT and NT.”
Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that there was little to be cheery about.
“The unfortunate truth is that there are few positive results to emerge from the latest Commonwealth Bank BSI,” said Mr James.
“The deteriorating results are a reflection of a number of months of sluggish consumer activity so these figures come as no real surprise. What is worrying, however, is that the ongoing pessimistic attitude present across Australia looks set to continue and in turn will continue to affect spending decisions.”
Industry analysis – the gap widens
Eight sectors contracted in July, the same number as in June and up from five in May. The weakest sector was Automobiles & Vehicles (down 2.2%), although the result remains affected by the restricted inflow of Japanese cars and parts following the earthquake and tsunami earlier in the year. In annual terms, seven of the 20 industry sectors contracted in July.
As has been seen in previous months, the Amusement & Entertainment sector (includes motion picture theatres, bowling alleys, golf courses and video stores) has continued to strengthen, up 1.9% in trend terms in July and up 18.7% in annual terms. This was followed by Wholesale Distributors & Manufacturers (up 1.2%) and Transportation (up 0.7%).
State / Territory analysis – overall picture strengthens whilst ACT maintains momentum
Five of the states and territories recorded weaker sales in trend terms in July, down from six in June. The weakest result was in NSW (down 1.2%), followed by Queensland and South Australia (down 0.9%). Queensland sales have consistently softened over the past 23 months.
The ACT, which has shown consistent growth over the past 10 months, continued to be the strongest performer in July (up 0.2%) followed by Northern Territory and Victoria (both up 0.1%). Spending growth has also remained positive in the Northern Territory in the past three months.
“The picture remains fairly consistent with what we have seen all year,” said Mr James. “There have been no clear indications of a turnaround in spending and no doubt the recent volatility seen in local and global markets will also be preying on consumers’ minds. We therefore expect things to trudge along at this pace for some time to come.”
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