Australian consumer spending stagnated in May, continuing the pattern seen in March and April.
According to the latest Commonwealth Bank Business Sales Indicator (BSI), a gauge on consumer spending that tracks the value of credit and debit card transactions processed through the bank’s electronic merchant facilities, sales dipped by 0.1% in trend terms in May, mirroring the performance seen in April.
The continued deceleration saw the annual pace of sales growth slow to 4.1%, down from 4.9% seen in the 12 months to April.
It currently sits well below the 7-7.6% growth rates seen in the six months to November last year, a period that coincided with a sharp acceleration in labour market hiring across Australia.
Sales have now failed to register an increase in the past three months, having grown for 15 straight months beforehand.
Although the BSI is based off the value of sales transactions processed by the Commonwealth Bank, as Australia’s largest retail bank, the results can be extrapolated to estimate trends in consumer and business spending across the broader economy.
While not broad-based in nature, Craig James, chief economist at Commsec, believes the data indicates that “economy-wide spending has stagnated in the past few months, with weaker spending especially across business and government sectors”.
“It is probably a case of being alert but not alarmed about the latest spending figures,” says James. “The jobs data has highlighted similar caution with hiring in the past few months.”
Underlining why James is not alarmed as yet, he notes that spending rose in 14 of the 19 industry sectors surveyed in the BSI in May, with much of the weakness concentrated in spending on government services.
It fell by 1.5% in trend terms over the month, the largest decline registered in well over a year. Spending on automobiles and vehicles, amusement and entertainment, retail stores and business services also declined during the month, offsetting gains in all other categories.
By state and territory, James notes that sales slid in Australia’s most populous states — New South Wales and Victoria — underlining the weakness in the headline BSI.
“Sales fell just in Northern Territory (down by 0.8 per cent), Victoria (down by 0.6 per cent) and NSW (down by 0.2 per cent),” said James.
“Of the other states and territories, strongest was South Australia (up 0.5 per cent) followed ACT (up 0.3 per cent), Western Australia and Queensland (both up by 0.2 per cent) and Tasmania (up 0.1 per cent).”
From a longer-term perspective, it was interesting to note that Victoria — one of Australia’s strongest-performing economies in recent years — was the only state or territory to record an annual decline in sales, slipping 2.5% from the levels of a year earlier.
“In annual terms only Victoria had sales below a year ago (down 2.5 per cent),” notes James.
“Strongest growth was in Tasmania (up 10.1 per cent), from ACT (up 8.5 per cent), NSW (up 7.2 per cent), Western Australia (up 6.0 per cent), South Australia (up 5.7 per cent), Northern Territory (up 4.7 per cent) and Queensland (up 4.6 per cent).”
While the momentum remains solid on an annualised basis, the recent sharp deceleration may be due to the upcoming federal election, says James.
“Perhaps we can put it down to the election,” he says.
“It’s probably fair to say that businesses want a decisive election outcome so that momentum can be quickly restarted.”
While that would be a welcome development, not only for businesses but households as well, two-party preferred polling continued to sit at around 50-50 suggesting that such an outcome appears unlikely to arrive at present.
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