Consumer spending picking up, says CommBank
Spending picked up as Australian consumer outlook marginally improved, but is not a "cause for celebration" according to the Commonwealth Bank of Australia (ASX:CBA).
The Business Sales Indicator (BSI), which tracks the value of credit and debit card transactions processed through CBA's point-of-sale terminals, recorded its first positive reading in nine months as it lifted 0.1 per cent in August.
However, in terms of annual growth, it declined by 2.7 per cent, the largest yearly drop since data were first collected six years ago.
The increase in spending in August showed a slight improvement in consumer confidence due to stronger underlying market fundamentals, but was not a cause for celebration, according to Matt Comyn, the Commonwealth Bank's general manager for local business banking.
According to him, while the latest data are reassuring and reflect renewed confidence in the overall domestic economy, "buoyed by stable interest rates, a firmer labour market and increased wages," it would be "premature to signal that the spending slowdown is over."
Craig James, the BSI's author and the chief economist of the Commonwealth Bank's broking subsidiary CommSec, said the central bank should take note of the August spending figures.
"The longer the Reserve Bank keeps interest rates on hold, the more confident consumers will become about opening their wallets," he said.
"The RBA would need solid justification from a higher inflation reading to lift rates in the next few months."
He said the outlook for spending was positive provided cash rates were kept on hold.
Mr James said "The jobs market is in good shape, wealth is at record highs, businesses are discounting to move stock and confidence remains at high levels."
However, Australian consumers and businesses are still very conservative, and would rather save than spend.