Aussie Businesses Slow Down Spending
In September of 2018, there were less new developments and office fitouts in Canberra and across the country, as Aussie businesses greatly cut their expenditures, resulting in the economy’s growth slowing down.
According to the Commonwealth Bank’s Business Sales Indicator (BSI); a measure that uses the value of credit and debit card transactions that were processed via the Commonwealth Bank merchant facilities to track the spending throughout the country’s economy, growth in September 2018 was just at 0.2%, one of the lowest rates its been.
While the BSI is only a measurement of transactions that were processed through CBA’s terminals, the CBA is the largest retail bank in the country, making it a good indicator of the state of the broader Australian economy. The BSI does, however, track spending for both retail sales and services, meaning its close to nominal consumption expenditure in Australia’s Quarterly GDP reports.
According to Commonwealth Bank Senior Economist Ryan Felsman, there was a noticeable weakening in business services-related spending in September, which he states might a reflection of the political uncertainty in Australia, on top of the impact of continued trade tensions between the US and China.
He says that their data shows that the business services area, including spending on office fitouts in Canberra and across the country, dropped to the lowest level its been for 43 months, up to that point. On top of that, sales in motor vehicle sales dropped to the lowest its been in 31 months.
Felsman says that the lowered spending might be due to more than just the increased caution by businesses, but also the recent declines in Australian home prices, particularly in Sydney and Melbourne.
While the housing market’s weakness might impact spending on big-ticket items like vehicles, Feldman stated that there wasn’t much suggesting that it was also crippling demand for other discretionary items.
He says that the CBA’s data show a positive theme around discretionary spending, with consumers showing they’re still willing to spend on experiences. Felsman explains that this is due to continued gains in the job market, and better job security, which is why people are more willing to spend at places like cafes and restaurants, as well as going on holidays.
The BSI noted that retail stores went up by 1% in September, the largest increase its seen in six months, while spending at hotels and motels went up by 0.8%, which is a continuation of the growth in the sector seen in the past five years.