Australian retail sales were flat over the month of May, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
During May, the BSI, which tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, remained unchanged in trend terms. In annual growth terms, the BSI slowed to 3.4 per cent, which was the slowest growth pace in 11 months.
According to executive general manager of local business banking at the Commonwealth Bank, Symon Brewis-Weston, the latest figures suggest it’s probably fear rather than fundamentals that is holding spending back.
“Consumers are still worried about the global economy as well as rising interest rates in Australia,” he said.
“That’s evidenced by the fact that people aren’t spending, despite the fact retailers are trying to entice shoppers with unseasonal discounting. Still, with the job market firm and wages edging higher, there are good reasons for consumers to start spending again later in the year,” said Brewis-Weston.
Craig James, chief economist of the bank’s broking subsidiary CommSec and author of the BSI, said the steady retail figures over May would once again support the case for interest rates to remain on hold next month and for the foreseeable future.
“The latest spending results certainly vindicates the decision by the Reserve Bank to leave rates on hold this month,” he said.
“And unless we signs of improvement in consumer and business spending in the near term there are good reasons for the Reserve Bank to stay on the sidelines.”
Of the 20 industries tracked in the BSI, spending was strongest in the repair services sector, rising 1.8 per cent over the month of May (in trend terms), followed by service providers and amusement and entertainment.
According to James, the industry analysis further supports the view that consumers have become more conservative.
"It’s not surprising to see that repair service businesses are thriving in the current retail environment as many consumers would rather get their current appliances repaired rather than investing more money into buying new products.
“It’s interesting to note that the two Australian territories, the Northern Territory and ACT, both have the lowest unemployment rates in the country and have the strongest results for the business sales indicator,” said James.