Sales fall for 12th consecutive month but retailers given some hope for Christmas

Sales continued to fall for a 12th consecutive month in November, according to the latest Commonwealth Bank Business Sales Indicator, but the result may deliver retailers some Christmas cheer as the fall was the lowest decline recorded over 2010 at just 0.1%.

The result also shows retailers may record a slightly better than expected Christmas, with the index lifting by 0.7% in trend terms if utilities are excluded. CommSec economist Craig James says the result is a “light at the end of the tunnel” for the industry.

Retailers also recorded one of the largest increases out of any industry, according to the report, recording a 0.9% growth rate over the past 14 months.

“In addition, a raft of other sectors are also showing improving growth trends, including the 0.4% trend growth at clothing stores which was the best reading in 19 months,” James says.

The figures show miscellaneous stores recorded the strongest gain of 1.1%, followed by professional services and membership organisations, which both recorded increases of 1%. Amusement & Entertainment along with retail stores both grew by 0.9%.

Person service providers, a category which includes laundries, hairdressers, shoe repair shops and tax agents, among others, recorded the largest increase – up by 8.2% compared to the same time one year ago.

However, the figures also shows the weakest sectors were the wholesale distributors and manufactures, and mail order and telephone order providers, both down by 0.3%. Hotels and motels also fell in November by 0.2%.

That figure is also accompanied by new data from Roy Morgan, which shows the tourism sector is in for a weak Summer as only 69% of Australians over 14 intend to take on holiday in the next 12 months – down from the previous result of 70% recorded in October 2009. The research firm also points out this result could be further impacted by rising interest rates.

But Commonwealth Bank local business banking executive general manager Matt Comyn says the results are positive given the current weak trading environment, and provide good indications that retailers may have a better than expected Christmas.

“It’s definitely encouraging news for businesses, especially as we head into Christmas and the New Year. The Christmas sales may have the ability to further push up spending figures, however this is something we will only be able to have visibility on come January.”

“The fact is that although overall spending throughout the retail sector remains weak, there are strong underlying fundamentals for the industry such as low job security concerns and an increase in household wealth.”

He also points out that the utilities sector was the main drag on this month’s result, and says that “if utilities are excluded, the BSI actually lifted by 0.7% in trend terms in November – the strongest reading for 15 months”.

The figures also show only three states and territories recorded negative growth, with Queensland the worst performer falling 0.6%. South Australia dropped by 0.5%, while Victoria also fell by 0.3%.

Spending grew by the largest amount in the Northern Territory, up by 1.1%, followed by New South Wales up by 0.6% and Western Australia, up by 0.4%. Spending grew by 0.3% in Tasmania and by 0.2% in the Australian Capital Territory.

Over the year as a whole, the only state to record growth was Western Australia, up 1.7%, while spending was weakest in Victoria, down by 7.2%.

“The latest BSI is definitely painting a brighter picture for the Australian economy and there is now light at the end of the tunnel for Australian retailers,” James says. “All eyes will be on the sector to see if the festive season brings with it some much needed cheer as we move into the New Year.”

But Comyn says the figures deliver a warning for retailers to ensure they keep on track of their finances and make the most of the busiest retail period of the year.

“Despite the positive findings from the latest BSI, it will be important for small businesses to ensure that they keep on top of their finances so that they can manage their performance against the backdrop of weak overall sales.”

“This includes ensuring that a business is efficiently managing its cashflow and that hidden extras, such as additional funds for special promotions etc, are accounted for, particularly around this time of year.”