By Aimee Chanthadavong
It appears retail may finally be looking up with consumer spirits lifting in October, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
For the 14th consecutive month economy-wide spending rose 0.4 per cent in October, following an identical rise in the previous month, after the September trend figures were revised to reflect new spending data. The October results also show that the pace of spending growth has stabilised over the last few months, after slowing between March and August.
Commonwealth Bank executive general manager of local business banking Adam Bennett said the findings are a sign that increasingly confident consumers could be ready to spend more freely in the lead-up to Christmas.
“With consumer confidence improving and property values rising strongly, the outlook for household spending is looking increasingly healthy,” he said.
“That’s good news for retailers, especially with the critical holiday trading period just around the corner.”
The automobiles and vehicles sector recorded the strongest growth of up 1.5 per cent, following the same rise in September.
The amusement and entertainment sector also continued to grow, with spending increasing 1.3 per cent for the month. While this is a positive result, it is somewhat lower than in August where the sector saw a 4.1 per cent jump.
On a state-by-state basis, South Australia again led the gains, with growth of 3.6 per cent. The Northern Territory was up 1.2 per cent with its 28th consecutive rise, while Victoria added 0.8 per cent.
Craig James, chief economist at the Bank’s broking subsidiary CommSec and author of the BSI, said there a number of economic factors that is potentially supporting this continued spending growth.
“While the labour market is still relatively soft, the unemployment rate has remained largely steady over the past six months, rather than moving higher,” he said.
“There has been continued focus on rising property prices and high auction clearance rates in some capital cities, which can have the effect of boosting consumer confidence and spending.
“Additionally, the Reserve Bank’s decision to keep interest rates on hold in November means that home owners are continuing to enjoy the benefits of record low interest rates.”
Despite this, James cautions that it’s not all positive for Australian business owners.
“Business sentiment has dropped, following the post-election boost, indicating that businesses are still facing tough conditions — and this is particularly the case for those affected by the high Australian dollar.
“However, over coming months, we should see low interest rates, rising consumer sentiment and improving housing activity continuing to support business conditions. What’s more, over the next year, we expect the Australian dollar will continue to ease, providing some relief for manufacturers and exporters.”