CBA Says Australian Consumer Spending Weak

A new report authored by Commonwealth Bank suggests that whilst the job market is stronger, consumer spending is at its weakest level since the height of the global financial crisis.

The Commonwealth Bank Business Sales Indicator (BSI) fell by 0.3 per cent in trend terms in June after a similar decline in May. The decline over the last quarter is the worst result since the start of 2008.

Craig James, chief economist at CommSec, who wrote the BSI report, suggests that the chief reasons behind the decline were higher interest, doubts over the state of the global economy, rising utility charges and council rates, all of which were weighing on consumer minds.

“While we are hopeful about a lift in spending later in the year, future Reserve Bank (of Australia) rate decisions will be pivotal. Consumers feel as (if) they are under siege at present and they need a period of interest rate stability so they can focus on both the positive and negative influences on the household budget.” Mr. James wrote in the report on Tuesday.

During the last year in trend terms, the BSI has risen just 0.7 per cent, registering its slowest growth in 17 months.

The trend pace of growth has consistently slowed over the past seven months, exactly tracking the slowdown in the Australian Bureau of Statistics retail trade series, Mr James said.

In trend terms, the weakest sectors during June were telephone order providers, mail order, retail stores, and automobiles and vehicles.

The strongest gains registered in June in annual terms were personal service providers, amusement and entertainment.

The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through CBA merchant facilities.

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