There are signs that economy spending is on the rise, but it appears that performance growth is still slow, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
The BSI for April increased by 0.5 per cent in trend terms, following a 0.6 per cent gain in March and 0.8 per cent increase in February.
According to Matt Comyn, executive general manager, local business banking, Commonwealth Bank, despite what looked to be a longer-term recovery for business sales, the latest figures revealed the story was not as positive as first hoped.
“Although things had looked promising, clearly the fragility we have witnessed in consumer confidence is still playing an active role in constraining the level of spending flowing through to businesses,” he said.
“This has resulted in economy-wide spending growing at the slowest pace in seven months. However, the recent rate reduction by the Reserve Bank, coupled with more favourable jobs data, may assist in lifting consumer confidence and sentiment over the next few months and act as an instigator for additional spending.”
“It remains to be seen whether or not these developments will create enough of a flow-on effect to boost spending and whether this will assist in closing down the disparity in performance amongst sectors, something which has been more prominent in the April data.”
Six of the industry sectors fell in April, up from five in March and four in February. The strongest monthly trend increase in sales occurred in the Amusement & Entertainment sector (up 2.3 per cent), followed by Wholesale Distributors & Manufacturers sector (up 2.2 per cent), Contracted Services (up 1.2 per cent), Mail Order & Telephone Order Providers (up 1.0 per cent) and Utilities (up by 0.8 per cent). Amusement & Entertainment remains the strongest performer in annual terms, to be 22.6 per cent higher than one year ago.
Amongst the weakest sectors in April was Hotels & Motels, down by 0.3 per cent, and the tenth straight decline. Business Services also fell in April for the fifth straight month, down by 0.1 per cent.
Craig James, chief economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that the path to recovery was still clearly a work in progress.
“While there has been positive momentum in spending, trend growth has eased over the past four months,” he said.
“The issue we have is that there is no clear-cut story when it comes to the economy. The ongoing challenges faced overseas continue to factor in to local spending decisions and whilst this uncertainty remains, it’s likely we will continue to see lower levels of growth in the near to medium-term.”