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Retailers benefit as consumers continue to spend

  • BSI rises again on a seasonally adjusted basis following similar rise in December 
  • Weakness narrows further with just three industry sectors falling 
  • Retail stores records largest gain across sectors, biggest increase in 17 months 
  • NSW and TAS up; QLD and VIC down

18 February 2011Businesses have continued to reap the benefits of an improvement in consumer spending, according to the latest Commonwealth Bank Business Sales Indicator (BSI) released today.

The BSI, which tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, eased in trend terms in January, however a closer analysis of the data shows that the BSI rose by 0.5 per cent in seasonally adjusted terms after a similar gain in December.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, there have only been three positive readings in the past 11 months so the recent gains are encouraging for retailers.

“These positive signs are pleasing, particularly as they take into account a number of economic setbacks that one would have expected to drive down sales,” said Mr Comyn.

“We’ve seen many small businesses devastated by the recent floods and this was against the backdrop of the already weak levels of consumer confidence. Therefore, to see the biggest industry category of Retail stores recording the largest gain across sectors and its biggest increase in 17 months is definitely good news.”

Whilst the signs were positive, Mr Comyn added that businesses weren’t yet out of the woods and that there were still a number of barriers ahead to a full recovery.

“The simple fact is that consumers will need to keep spending and in larger amounts if we are to see this recovery continue, particularly at smaller outlets where this continued support is so important. With consumers still cautious and many preferring to hang on to their money, it looks to be a slow road ahead.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that by reviewing the data in both trend and seasonally adjusted terms, it was possible to see distinct shifts in consumer spending patterns.

“While ordinarily the trend measure is preferred for data analysis as it is less volatile and shows broader trends, seasonally adjusted estimates can highlight key turning points in the data,” said Mr James.

“The good news is that we have seen overall growth in sales in seasonally adjusted terms. And turning to the less volatile trend estimates, another source of encouragement is the fact that the majority of industry sectors continue to record spending growth. In trend terms, the value of spending transactions fell in only three of the 20 industries in January, down from eight sectors in November.”

Industry analysis – Retail stores powers ahead with Contracted services not far behind

In addition to the strong gains posted by Retail stores (up by 1.3 per cent), Contracted services also performed strongly, up 1.2 per cent in trend terms the month and up 6.2 per cent over the year. The Contracted services category includes a range of building trades such as electrical services, carpenters and landscape services. This sector was followed by Repair services and Service providers, both up 1.1 per cent. Service providers include financial and insurance services.

Other sectors to post positive gains included the Amusement & entertainment sector with growth of 0.5 per cent in January, the best reading in 15 months. The sector includes motion picture theatres, bowling alleys, golf courses and video stores. Mail order/telephone order providers also recorded its best gain in 25 months, up by 0.6 per cent.

The weakest sectors in January in trend terms were Miscellaneous stores (down 1.2 per cent), Hotels and motels (down 0.4 per cent) and Government services (down 0.1 per cent). Miscellaneous stores was also one of the weakest sectors in annual terms, down 11.9 per cent.

State / Territory analysis – Queensland and Victoria down although flood impact minimal

Only two of the eight states and territories recorded lower trend sales in January, down from four states in December. Sales were down by 0.1 per cent in both Queensland and Victoria however there was no noticeable impact of either the floods or Cyclone Yasi in the BSI state results.

Spending rose most in NSW (up 0.6 per cent), followed by Tasmania (up 0.5 per cent) and Western Australia (up 0.3 per cent)

In annual terms, the only two states/territories to record growth in January was NSW (up 1.1 per cent) followed by Western Australia (up 0.9 per cent). At the other end of the scale, the spending gauge was weakest in Victoria (down 9.1 per cent) followed by South Australia (down 8.6 per cent) and Queensland (down 5.9 per cent).

“The latest figures do appear to show that we are on the road to recovery, however with high fuel prices and the prospect of a rise in both interest rates and the price of food, consumers will remain fairly guarded,” said Mr James.

Media Inquiries:

Tim Mullen
Phone: 02 9118 1667

Mobile: 0424 141 483

About the Commonwealth Bank Business Sales Indicator

  • The Commonwealth Bank Business Sales Indicator is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia (approximately 30 – 40 per cent of the market). 
  • The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy (covering 20 industry sectors and all Australian states and territories) and is available to the public on the Bank’s website and to the media on or around the 20th day of each month. 
  • Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms. 
  • The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.
  • The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. 
  • The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers. The Business Sales Indicator includes industry sectors based on the International Merchant Category Code (MCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment. Refer to Table 1 for the MCC listing.