All improvements in spending recorded during May and June have been reversed, according to a leading index, as consumer sentiment proves it’s far from recovered.
Spending fell by 5.4 percent in July, says the latest Commonwealth Bank Business Sales Indicator (BSI), after gaining 1.7 percent and 3.1 percent in May and June respectively.
The BSI measures economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, which account for around 30 percent of the local market.
Acting executive manager for Local Business Banking, Gary McGrath, has described the results as a blow to businesses.
“The turnaround we have witnessed here simply reinforces the consumer we are dealing with today… It is clear that while favourable market events such as stimulus measures can provide a welcome boost to spending, the underlying consumer attitude is not going to change overnight or even in a matter of months,” he said.
Five of the industry sectors fell in July in trend terms. The weakest sectors were Automobile & Vehicles (down 0.7 percent), Transportation (down 0.6 percent) and Personal Service Providers (down by 0.2 percent).
On a state-by-state basis, sales in Victoria fell by 0.2 percent and 0.1 percent in NSW. The strongest results were recorded in South Australia and the ACT (both up 0.8 percent), followed by Northern Territory (up 0.7 percent), Tasmania (up 0.6 percent) and Queensland and Western Australia (both up 0.4 percent).
CommSec chief economist and BSI author Craig James said that although consumers have been given more of a reason to spend in recent months, confidence is still the key factor at play here.
“With an end to the stimulus measures provided to sections of the community and the Reserve Bank holding the cash rate steady in July, we have seen consumers’ more relaxed attitude taper off. This is also despite less noise coming from global markets which has been another key factor impacting the domestic market.”