Monthly spending rises again in December, but economist wary of calling a turnaround

Monthly spending has risen again, but economists are reluctant to call it a turnaround, with retail sales ending 2011 a shocking 9.3% down year-on-year.

The Commonwealth Bank Business Sales Indicator, which tracks the value of credit and debit card transactions processed through the bank’s merchant facilities, rose by 0.2% in trend terms and 0.5% in seasonally adjusted terms last month.

The five consecutive months of gains is the best run of gains since late 2009, but the bank notes that it has revised down its November sales jump to 0.1% from 0.6%.

The figures also confirm that retail and miscellaneous stores struggled throughout 2011, but mail order and telephone order providers and amusement and entertainment companies hit a purple patch.

“It’s important to note that the gains are off a very low base,” CommSec economist Savanth Sebastian says.

“Further rate cuts will be needed to really support [spending].”

Still, Sebastian notes that the recent rises follow an almost 18-month period where the BSI was tracking weaker.

“It doesn’t signify a significant turnaround, but it’s an improvement at the margin and I don’t see that changing to any great degree in the short-term.”

All the states and territories recorded a lift in trend terms in December.

The monthly figures show that just four of the 20 industry sectors contracted in December, namely miscellaneous stores (down 2.8%), hotels and motels (down 0.9%), business services (down 0.3) and utilities (down 0.1%).

The best performers were mail order/telephone order providers (up 3.3%), clothing stores (up 1.7%) and amusement and entertainment and retail stores (both up 1.3%).

Alarmingly, in annual terms, six of the 20 industry sectors contracted in December, matching a decline in November.

The weakest sector was retail (down 9.3% annually), followed by miscellaneous stores (down 8.2%), automobiles and vehicles (down 2.6%) and hotels and motels (down 2%).

On the plus side, mail order and telephone order providers soared 19.4% year-on-year, followed by amusement and entertainment (up 18.3%), clothing stores (up 10.8%) and contracted services (up 6.1%).

Peter Strong, executive director of the Council of Small Business of Australia, says the 0.2% jump is “encouraging” but doesn’t make him “jump with joy”.

“They’re up, but it’s such a confusing market place out there so it’s difficult to assess how things are tracking.”