Australian consumers continue to think twice when they open their wallets, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
Despite that, economy-wide spending did grow by 0.4 per cent in trend terms in February, the sixth consecutive monthly increase in spending.
The seasonally-adjusted BSI measure also posted a gain of 0.2 per cent in February, extending the 2.0 per cent lift in spending recorded in January. Annual growth in spending now stands at 4.7 per cent in seasonally adjusted terms and 4.8 per cent in trend terms.
According to Adam Bennett, executive general manager, local business banking, Commonwealth Bank, the latest results offer a promising outlook for businesses across the country.
“Although there was a slight decrease in the rate of growth in February, these results remain a positive sign for businesses. In trend terms we’ve now seen six straight months of gains, which indicates consumers are willing to spend even if they are still treading with caution,” he said.
“However, businesses need to be mindful that we are still interacting with a persistently cautious consumer and that these patterns will not significantly shift overnight.”
The strongest monthly trend increase in sales occurred in Amusement & Entertainment (up 2.1 per cent), followed by Service Providers (up 1.3 per cent) and Transportation (up 1.0 per cent). Across sectors, five of the industry sectors fell in trend terms in February, up from three sectors in January but level with the December result. Amongst the weakest sectors in February were Mail Orders & Telephone Order Providers (down 3.8 per cent), Business Services (down 0.4 per cent) and Contracted Services (down 0.1 per cent).
Sales rose most in the ACT (up 0.9 per cent), followed by South Australia (up 0.7 per cent), NSW, Queensland, Tasmania and Western Australia (each up 0.5 per cent), Northern Territory (up 0.4 per cent) and Victoria (up 0.1 per cent). None of the states and territories recorded weaker sales in trend terms in February.
The trend BSI has now risen for 21 straight months in Northern Territory, for 20 straight months in Queensland, for 19 months in South Australia, for 17 straight months in ACT and for 11 straight months in Tasmania.
Craig James, chief economist of the Bank’s broking subsidiary CommSec and author of the BSI, believes the latest results mimic the broadly positive start to the year seen across the economy.
“When we look at annual spending, overall we are undoubtedly in a better position than we were this time last year. We have seen consumer spending respond in line with positive economic indicators, and this is contributing to the formation of back-to-back spending gains,” he said.
“However, while spending is up 4.7 per cent in annual terms, we know that consumers are still acting with caution and this sentiment will continue to affect spending patterns in the short term. With the Reserve Bank holding the cash rate steady in February, we have seen consumers maintain cautious optimism when it comes to spending. Despite this, we have seen solid annual gains across a range of sectors and states and this is a good news story for many businesses.”