Consumer spending continues to fall‎

The purpose of the BSI is to gauge economy-wide spending by tracking the values of debit and credit card transactions made through Commonwealth Bank terminals.

Matt Comyn, executive general manager of local business banking at the Commonwealth Bank, claimed this figure was an indication that tough conditions would continue for Australian businesses.

“The level of negative sentiment we are seeing amongst consumers is definitely worrying and the latest BSI is proof that this sombre mood is hurting businesses,” said Comyn. “Although we haven’t seen any movement on the interest rate front, it’s clear that consumers continue to be rattled by both developments at home and abroad. The fact that we didn’t see an increase in purchases at retail stores during a heavy discount period is further proof of that.”

Craig James, chief economist of CommSec, and author of the BSI, reinforced Comyn’s perspective, claiming that the June figures revealed recent optimism to be “a mirage”.

“The BSI had been recording improvement from July 2010, however there has been a sharp reversal of the fortunes of the retail sector over the past two months,” said James. “Consumer sentiment, affected by domestic and international developments, is no doubt one of the key factors fuelling the decline in sales and although the state picture is mixed, there is definitely a rocky road ahead.”

Although the indicator demonstrated a 2% drop in automobiles and vehicles, a 0.9% fall in retail store spending and nominal falls in miscellaneous retail and vehicle hire, the other 16 industry sectors included in the data recorded growth in spending. The indicator reported continued growth in spending on amusement and entertainment, up 1.3% in June, as well as an increase in spending reported by clothing stores, up 1.1%. These strengths were attributed to consumer reaction to cold weather.

By state, the Australian Capital Territory showed an increase in spending of 1.3% over the month, followed by Western Australia and the Northern Territory, both of which rose by 0.1%. New South Wales reported the weakest result, as spending in the state dropped 1.5%, followed by South Australia and Queensland, both down 0.9%, and Victoria, down 0.3%.

“As we have seen in past couple of months, the news isn’t all bad,” said James. “Only four sectors contracted in June and the state picture is also better this month. Four states recorded weaker sales, down from six in May, and we’re seeing some definite shining lights such as the ACT which has shown consistent growth over the last nine months.”

“Whilst the June figures are far from positive, they have also highlighted that some sectors have suffered from external factors such as the recent disaster in Japan,” he continued. “As a result, this short-term negative performance should improve in the coming months, particularly for sectors such as Automobiles & Vehicles where we see a more positive outlook.”