By Aimee Chanthadavong
Consumer spending is the strongest it has ever been in six years, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
Spending grew by 1.0 per cent in trend terms in May, following on from a 1.2 per cent increase in April and 1.1 per cent gain in March. This is the largest quarterly increase since 2007. Annual growth now stands at 7.4 per cent in trend terms, up from 6.6 per cent in April.
According to Adam Bennett, executive general manager, local business banking, Commonwealth Bank, the back-to-back gains are a positive sign that consistent spending patterns are forming.
“Business owners should be encouraged by the fact that spending lifted again in May, marking the ninth consecutive monthly gain. It’s particularly encouraging to see that spending in the Retail Stores sector, which makes up nearly one third of the BSI, rose by 2.3 per cent over the month of May, and is now up 12.9 per cent in annual terms,” he said.
“It would appear from the BSI data that consumers are feeling more confident, and a clear upward pattern in spending is emerging. This may have been boosted by the Reserve Bank’s decision to cut interest rates in May, and hopefully we’ll see this momentum in spending continue.”
As a result, this is reflective of spending in the retail stores sector, which makes up nearly one third of the BSI. It rose by 2.3 per cent over the month of May and is now up 12.9 per cent. The retail stores sector was the largest industry monthly gain in May.
Savanth Sebastian, economist at the Bank’s broking subsidiary CommSec, believes the ongoing growth is a sign consumers are more willing to open their wallets.
“We have now seen nine months of consistent economy-wide spending growth, in marked contrast to the weakness exhibited from May to September last year. This is good news for businesses across Australia, as it means consumers are more confident, and the earlier tentative signs of improvement in spending are now being translated into firmer readings,” he said.
Other strong sectors included, Utilities and Wholesale Distributors & Manufactures sectors, which both recorded a lift of 1.4 per cent. Amongst the weakest sectors in May were Mail Orders & Telephone Order Providers (down 1.6 per cent) with Automobiles & Vehicles, Business Services and Hotels & Motels all losing 0.6-0.7 per cent.
On a state-by-state basis, none of the states and territories recorded a decline in sales across the month with NSW recording the largest lift in spending across May up 1.9 per cent. This was followed by the Australian Capital Territory (up 1.5 per cent), South Australia (up 1.0 per cent) and Queensland (up 0.6 per cent).