Economy-wide spending stalled in June, CommSec blames ‘winter chills’
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If anyone is talking about weather at the moment, they are in the Northern Hemisphere with European heatwaves and over the weekend the USA.
But while there’s little unusual about our weather, CommSec believes it is affecting the economy. The Business Sales Indicator (BSI) was released this morning and showed the weakest monthly growth rate in over two years.
And Australia’s largest bank blamed the onset of winter, among other reasons for the slump.
“Consumer caution and the onset of cold weather appeared to discourage Aussies from venturing out to the footy, cinema, theatre and music concerts,” CommSec said.
It also blamed slower wage growth, elevated mortgage debt and growing worries about job security.
The BSI measures economy-wide spending tracking credit and debit card transactions processed through merchant facilities. Thus, it tracks businesses left uncovered by the traditional retail establishment label including airlines, motels and professional services.
However, the two strongest states were Victoria and Tasmania — the two states one would expect to have the coldest weather.
The strongest gainer in June was easily telephone order providers, which were up 1.8 per cent, while sales fell the most in amusement and entertainment — down 1.2 per cent.
But on an annual basis the picture was far rosier with all states and territories reporting growth compared to a year ago, with Tasmania and Victoria leading the way at 6.2 per cent and 5.1 per cent respectively.
The strongest industries were transportation, retail, airlines, utilities and hotels. Automobiles and vehicles was the biggest laggard with sales falling 7.4 per cent.
CommSec argued this validated the decision to cut interest rates in June and July. It noted this and tax cuts should boost spending in the months ahead.
This would spur wages and inflation growth – the latter being the RBA’s focus.
While other banks such as Westpac have made firm predictions that the RBA will cut rates again, specifically in November, CommSec was less convinced.
“The Reserve Bank is expected to ‘sit pat’ for now, assessing incoming economic data over the coming months before deciding the next move for the record-low cash rate,” it said.
“But the board stands ready to act ‘if needed’ to support the economy and the job market.”