Spending indicator shows continued contraction
Spending indicator shows continued contraction

An indicator of spending in the Australian economy has fallen for the 17th consecutive month, highlighting the patchiness of the Australian economy.

The Commonwealth Bank of Australia business sales indicator posted a fall of 0.2 per cent in trend terms in April.

The BSI is derived from the value of credit and debit card transactions processed through the bank's merchant facilities.

Craig James, chief economist at the bank's broking arm, CommSec, warned that the unusually late timing of Easter may have affected the seasonal adjustment and therefore the trend measure that was based on the adjusted sales data.

The retail sector was the weakest, with a trend rate of decline of 1.4 per cent per month, although it was one of only four sectors out of 20 that showed a downward trend in April.

Excluding retailing, the overall trend was upwards, at the rate of 0.3 per cent per month, the strongest for just under a year and a half.

Aside from the question mark over Easter, the figures still showed spending was markedly down from levels of two years ago, Mr James said.

The figures highlight the dilemma faced by the Reserve Bank of Australia.

The mining investment boom and revenue from minerals exports promise to boost economic growth, but the removal of fiscal and monetary stimulus, stronger Australian dollar and caution among households in the wake of the global crisis have put the brakes on sectors apart mining.

If the mining sector does not deliver the goods as far as growth is concerned, more restraint in the form of the interest rate hike, which economists expect any month now, will increase the risk of an unintended and unnecessary economic slowdown.

The BSI shows that such a risk is far from trivial.

The West Australian

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