18 November 2011: Business sales have continued to strengthen, seeing another positive result in October and the strongest gains posted since September 2009, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
The BSI is a key measure of economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, a sample of approximately 30 per cent of the Australian market. The BSI rose by 0.4 per cent in October, following a 0.3 per cent increase in September and a 0.2 per cent increase in August.
According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest figures were a sign of a more defined shift in consumer spending, something particularly important at this time of the year.
“We are now seeing stronger signs of a recovery in consumer spending which will have associated benefits for businesses across Australia,” said Mr Comyn.
“These latest results are also important as they came before the November rate reduction which could indicate that there are further positive things to come on the back of the associated lift we have seen in consumer confidence. This will be especially important for retailers as we head into what many hope will be a busy Christmas season.”
Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said the October numbers reaffirmed that consumers were becoming more confident and that there were further positive signs in the reduced number of sectors experiencing weaker sales.
“Although the cautious consumer attitude has not yet dissipated, something highlighted by the seasonal figures, the latest BSI should provide continued encouragement for Australian businesses,” said Mr James.
“While we are still talking about small numbers, the negative pattern we saw for a large part of this year is turning around. There has also been some strong sector performance particularly in the last month, including Personal Service Providers (such as hairdressers and shoe repairers), which saw growth of 0.5 per cent in October, making it the strongest increase in sales for this sector in 12 months.”
Industry analysis – sector weakness contracts
The number of sectors reporting weaker sales eased from seven in both August and September to five in October. Another two sectors recorded flat growth in October. Service providers recorded the strongest gain (up 0.7 per cent), followed by Wholesale Distributors & Manufacturers, Transportation and Clothing Stores (all up 0.6 per cent) and Repair Services, Personal Service Providers and Automobiles & Vehicles (all up by 0.5 per cent).
In annual terms, just five of the 20 industry sectors contracted in October, down from six sectors in September. The weakest sector was Miscellaneous Stores (down by 6.9 per cent on a year earlier), followed by both Automobiles and Vehicles and Automobile/Vehicle Rentals (both down 1.8 per cent).
State / Territory analysis – almost every state/territory strengthens
ACT was the only state/territory to record weaker sales in trend terms in October, a similar result to both August and September, falling by 0.2 per cent. The strongest result was in Tasmania (up 0.8 per cent) followed by NSW (up 0.7 per cent), Northern Territory (up 0.6 per cent), Western Australia (up 0.3 per cent), Queensland and South Australia (both up 0.2 per cent) and Victoria (up 0.1 per cent).
In trend terms, sales in Tasmania lifted by 0.8 per cent in both September and October and these represent the best results in 32 months. The jobless rate in Tasmania stands at 5.0 per cent, the second best of all State economies. In annual terms, strongest growth was in the Northern Territory (up 5.4 per cent), followed by ACT (up 2.8 per cent), Tasmania (up 1.0 per cent) and Victoria (up 0.3 per cent).
“We will have to wait and see what impact the rate reduction in November will have on business sales when these figures are published next month,” said Mr James. “Consumers will also be closely watching overseas events as the struggles in the Eurozone continue to take shape over the coming months. While rate decisions are important, this ongoing uncertainty will still have a very real part to play in the future performance of business sales.
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