Consumer spending declined for a fourth consecutive month in June by 0.3%, the new Commonwealth Bank Business Sales indicator reveals, resulting in the worst group of results since the global financial crisis began over two years ago in 2008.
CommSec says the result is really being felt in the retail sector, which is suffering to attract frugal customers with continued discounting.
The index, which is calculated by tracking the value of credit and debit card transactions, fell by 0.3% in trend terms following a similar fall in May.
The value of spending transactions fell in nine of the 20 industries in June, which is actually an improvement when 14 of the industries declined in May. Services providers were up 0.8%, followed by amusement and entertainment which was up 0.6% – an industry CommSec economist Craig James says has remained relatively high.
The weakest industries were mail order and telephone order providers, down by 2.8%, with automobiles and vehicles down by 2.6%. Retail stores were down 1.7%.
In annual terms, the strongest sectors were service providers, up 24.4%, amusement up 8.4% and personal service providers up 7.6%.
Tasmania, Queensland, New South Wales, Victoria and South Australia all recorded negative growth, while spending was flat in the ACT and up by 0.2% in the Northern Territory and 0.4% in Western Australia.
James said in a statement while more people are working, and job security is improving along with consumer sentiment, “there are still few signs that consumers want to open their wallets more widely”.
“No doubt higher interest rates, lingering concerns about the health of the global economy and rising utility charges and council rates are entrenching more conservative borrowing and spending practices by Aussie consumers.”
“While we are hopeful about a lift in spending later in the year, future Reserve Bank rate decisions will be pivotal. Consumers feel as they are under siege at present and they need a period of interest rate stability so they can focus on both the positive and negative influences on the household budget.”
CommSec says the BSI has risen just 0.7% in trend terms over the past year, representing the slowest growth in 17 months.
The real trouble spot is retail, James says. Retailers are still discounting, even though it is becoming harder to attract new customers. However, he says the falling unemployment rate should help retailers along through the rest of the year.
“Consumers continue to be selective about purchases, causing retailers to keep discounting to move stock. The key issue is the hit to household budgets caused by utility charges, higher interest rates, health fund premiums and even higher tobacco prices for the few who still choose to smoke.”
“The outlook for consumer spending is more positive given the strength of the job market and record wealth levels”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
