Imminent mortgage and tax relief failed to boost economy-wide spending in June, with the latest Commonwealth Bank Business Sales Indicator reporting the first seasonally adjusted decline in six months.
The BSI – a measure of economy-wide spending – recorded the weakest monthly trend growth rate since February 2017, falling for the fourth consecutive month, from 4.6 per cent to 4.1 per cent in June.
In seasonally adjusted terms, the indicator fell by 1.1 per cent – the first decline in six months.
CommSec senior economist Ryan Felsman said people had tightened their belts in 2019, but should begin to spend more as the effects of dual rate cuts in June and July – and Federal Government tax relief – gain traction.
“Both consumer and business sentiment have been choppy in recent months, but combined stimulus from interest rate and tax cuts are expected to boost spending in the coming months,” said Mr Felsman.
The BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities, and includes spending on cars, personal services and airlines as well as retail.
Across sectors, June spending rose for 11 of the 19 industries in trend terms.
Amongst the biggest gains in sales was a 1.8 per cent gain for mail order and telephone order providers, a 0.6 per cent gain for utilities, and a 0.4 per cent gain for both service providers, and professional services and membership organisations.
Sales fell most in amusement and entertainment – down 1.2 per cent – and automobiles and vehicles, down by 1.0 per cent.
The strongest spending gains were recorded in Victoria and Tasmania (both up 0.4 per cent), followed by the Northern Territory (up 0.3 per cent) and South Australia (up 0.2 per cent).
But spending fell most in WA (down 0.2 per cent) and NSW (down 0.1 per cent).
Spending was broadly flat in the ACT and Queensland in June.
The Reserve Bank of Australia cut the cash rate in early June to a then-record low of 1.25 per cent as a measure to stimulate economic growth.
The central bank followed up with a second 25 basis point cut in July to 1.0 per cent, while federal tax cuts should give low and middle-income earners an extra $1000 when they file their 2018/19 tax returns.
Despite the optimism, consumer sentiment has fallen to a two-year low according to the latest Westpac-Melbourne Institute index.