While spending has lifted in July by 0.2 per cent in trend terms, it was the slowest pace on record since September 2012, the Commonwealth Bank Business Sales Indicator (BSI) shows.
This is the 11th consecutive month of spending growth. But this is down from the 0.6 per cent increase recorded in June and 0.8 per cent growth in May. In annual terms, growth lifted from 7.5 per cent to 7.9 per cent, which is the highest level in five and a half years.
The more volatile seasonally adjusted measure of sales fell by 2.0 per cent in July after dropping by 2.1 per cent in June, and expanding by 5.4 per cent in May. However, annual growth in spending remains firm, lifting to 6.9 per cent in July, up from 4.4 per cent in June.
According to Adam Bennett, Commonwealth Bank executive general manager of local business banking, while the latest results aren’t as positive as anticipated, businesses should still be encouraged by the back-to-back sales gains.
“While we are still operating within a softer economic environment, many business sectors have seen an upturn in sales in 2013,” he said.
“Although the pace of growth slowed in July, we have now seen consistent increases for 11 months.
“For many businesses there are still positives to be taken from the July results. The overall annual growth is still solid, and the majority of states and territories are still posting positive gains. What this tells us is that there is still spending momentum, albeit at a slower pace.”
Across sectors, 13 of the 19 industry sectors increased in trend terms in July. Amusement & Entertainment (up 6.0 per cent) and Mail Order/Telephone Order Providers (up by 2.5 per cent) were amongst the strongest sectors in July.
Spending fell in Utilities (down by 1.6 per cent), followed by Business Services (down 1.4 per cent), Transportation, and Automobile & Vehicle Rentals (both down 0.4 per cent), Repair Services, and Hotels & Motels (both down by 0.2 per cent).
On a state basis, ACT recorded the largest lift in spending for the month, which was up 1 per cent. This was followed by Tasmania (up 0.6 per cent), Queensland (up 0.5 per cent) and New South Wales (up 0.3 per cent).
Western Australia was the only state to record weaker sales in trend terms in July with spending contracting 0.6 per cent in trend terms in July. This follows declines of 0.4 per cent in June and 0.1 per cent in May.
“While the overall sentiment is subdued, businesses should be encouraged by the positive economic indicators we’re currently experiencing,” Craig James, chief economist at the Bank’s broking subsidiary CommSec, said.
“We’ve seen pockets of strength in new housing developments across the major capital cities and modest improvement in the manufacturing sector as well.
“This, coupled with the decision by the Reserve Bank to lower the official cash rate to historical lows this month, means consumer sentiment should remain positive throughout the coming months and hopefully that will translate into a boost in spending pace.”