This indicator suggests a nosedive in Australian consumer spending

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The value of Australian credit and debit card purchases processed by Australia’s largest bank fell for a fourth consecutive month in March, indicating that spending may be stalling across the broader Australian economy.

According to the latest Business Sales Indicator (BSI) released by Commsec today, the value of transactions processed through Commonwealth Bank terminals fell by 0.7% in trend terms in March, the steepest monthly contraction recorded in the past three years.

The annual pace of sales slowed to 4.0% from 5.6% in February as a result of the decline.

While it’s just transactions from the Commonwealth Bank, the result from Australia’s largest bank could be used to extrapolate spending patterns at other Australian financial institutions.

No matter what way you view it, the chart of the BSI below, supplied by Commsec, makes for uncomfortable viewing.

Commsec reports that at a sectoral level, spending declined at 13 of the 19 industries, up from 12 sectors in February.

Mirroring that performance, sales fell in six of Australia’s eight states and territories.

The weakness in the BSI over the past four months mirrors underwhelming retail sales figures released by the ABS between December to February. Commsec notes that the BSI covers spending across the economy rather than just retail sales, including spending on automobiles, personal services and airlines.

Before you start pricing in the risk of a steep deceleration in economic growth, or worse, Commsec’s chief economist Craig James warns there may have been some one-off factors that led to the ugly contraction in March.

“The extra day in February and early timing of Easter appear to have influenced the indicator in March, so the results should be interpreted with care,” says James. “More considered analysis will be possible with publication of the April BSI.”

James warns that there is a risk “that activity levels slow further in the lead up to the federal election”, although, counteracting potential caution before what is firming as a July 2 election date, he suggests recent strength in Australian stocks, along with the Aussie dollar, “will help to boost confidence among households”.

Still, the recent trend is spending patterns is concerning, particularly given the need for household consumption to remain firm in the quarters ahead to help offset the negative economic effects from the unwinding mining capital expenditure boom.

The ABS will release its March retail sales report, along with the crucial first quarter retail turnover figure which feeds into household consumption in GDP, on May 5.

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