March retail sales up – RBA must act with caution
21 April 2010: Australian retail sales increased strongly over the month of March, according to the latest Commonwealth Bank Business Sales Indicator (BSI)(i). The BSI, which tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, rose by 0.7 per cent (in trend terms) in March, which was the strongest growth rate in eight months.
According to Executive General Manager of Local Business Banking at the Commonwealth Bank, Symon Brewis-Weston, the stronger retail figures are an encouraging sign that business conditions are slowly improving, but they are not strong enough to warrant an increase in interest rates by the Board of the Reserve Bank of Australia when it meets in May.
“While the latest figures appear solid, it's important that the Reserve Bank doesn't over-react. Interest rates have lifted sharply since late last year and the effects are being felt, with housing loans down for five months in a row.”
Craig James, Chief Economist of the Bank's broking subsidiary CommSec and author of the BSI, said that although the results are an improvement on previous months, they could have been affected by unseasonal spending.
“No doubt the latest results are encouraging. The only element of doubt is whether the figures are affected by the 'Easter effect'. That is, the fact that Easter occurred earlier than usual this year, pushing seasonal spending into March. Unfortunately, the seasonal adjustment process can't properly account for changes in the timing of Easter.”
Industry Analysis – Tourism sector impacted by high Aussie dollar
Of the 20 industries tracked in the BSI, spending was weakest for the tourism industry, with the Hotels and Motels sector recording no lift in sales over the month of March.
According to Mr James, spending at hotels and motels has been consistently weak over the past year due to the high Australian dollar and the flow on effects from the global financial crisis.
“The data shows that hotels and motels are still struggling, as a record number of Australians choose to head overseas for their holidays to make the most of the strong Aussie dollar. To make matters worse, the inbound tourism market still hasn't fully recovered from last year's financial crisis.”
State/Territory Analysis – ACT leads the way
The BSI found that all states and territories recorded a lift in sales in March. Spending was strongest in the Australian Capital Territory, recording a lift of 1.2 per cent, followed by Western Australia with a gain of 1.1 per cent. In contrast, New South Wales and Tasmania recorded most modest gains on 0.6 per cent.
- ENDS -
Phone: (02) 9118 1667
i. About the Commonwealth Bank Business Sales Indicator
- The Business Sales Indicator is calculated by tracking credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia (approximately 30 – 40 per cent of market).
- The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy and is available to the public on the Bank’s website and to the media on or around the 20th day of each month.
- Currently, the main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. The main quarterly indicator of spending in the economy is the ABS Household Final Consumption Expenditure (HFCE). A quarterly measure of the Business Sales Indicator has closely tracked the ABS household consumption series over the past three years, highlighting the value of the Business Sales Indicator to track changes in spending across the economy. The Business Sales Indicator is available monthly; broader household consumption figures are only available from the ABS on a quarterly basis.
- The Business Sales Indicator includes industry sectors based on international Merchant Category Code (MCC) categories.