Australian retail sales were flat over the month of May, with retailers half-yearly clearance sales failing to attract shoppers, 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. 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 Mr 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. 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.”
Interest rates are widely tipped to remain on hold through July, at least until the RBA sees CPI (inflation) data in late July, should the CPI data show inflation within the target range as the CBA BSI data suggests, interest rates are likely to remain on hold indefinitely.