Consumer spending slows amid falling confidence

Spending by Australian consumers rose just 0.2 per cent in September, the weakest monthly increase in 16 months.

But spending on retail increased by 1 per cent, the biggest increase in the previous six months and the second biggest increase in the month, after entertainment at 1.1 per cent, according to the Commonwealth Bank Business Sales Indicator.

“Our data shows a positive theme around discretionary spending continuing, with consumers still willing to spend their money on experiences, “ CommSec senior economist Ryan Felsman said.

“Better job security, and confident gains in the job market, has translated into people feeling more upbeat and therefore more comfortable to spend money at places like cafes and restaurants, and going on holidays.

“Cheaper clothing prices and inclement weather also encouraged shoppers to head to department stores.”

While spending on the clothing sector has fallen by 2.5 per cent annually, spending across retail stores grew by 16 per cent, with all states and territories seeing an increased level of sales.

Western Australia saw the largest growth, up 11.2 per cent annually, followed by Victoria and Queensland with increases of 11.1 per cent. South Australia grew by 9.9 per cent, while the ACT saw a 8.5 per cent improvement, with NSW trailing at 7 per cent, Tasmania at 6 per cent and the Northern Territory seeing the slowest growth at 0.8 per cent.

However, the increase in spending has not necessarily translated to increased business confidence, according to the NAB Quarterly Business Survey, which found that confidence dropped by 4 points in Q3 – a little below its historical average.

NAB Group’s chief economist Alan Oster said the fall in confidence was of some concern, but that the latest survey results suggest improvement is just around the corner. However, that may not be the case for retail.

“Conditions have eased across most industries, though generally most industries continue to report above average conditions,” Oster said. “Retail however, remains weak, as it has been for some time.”

The survey found that the impact of a recent minimum wage decision, an interest of 3.5 per cent in 2018, has hit the retail sector hard, reflecting the high proportion of employees on the minimum wage in that sector.

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