Consumers are spending again, but for how long?

  • Business Sales Indicator records a 0.5 per cent rise in trend terms in February – the strongest result in 18 months
  • Only two industry sectors record weaker sales in February
  • Retail stores sales lift again, recording sixth straight gain
  • VIC and SA strong performers; all states and territories record stronger spending

18 March 2011: Consumer spending appears to have turned the corner following the strongest monthly growth in sales in 18 months, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

The BSI, which tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, rose by 0.5 per cent in trend terms in February, following previous gains in December and January.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, whilst the news is good, the strengthening in sales figures is in direct contrast to wider economic indicators which continue to show an overall weakness in consumer sentiment. As a result, he warned that the latest results shouldn’t be taken simply at face value.

“There’s no doubt that this is the first clear sign that spending is coming back online and that businesses are starting to see the benefit of consumers opening up their wallets,” said Mr Comyn.

“Whilst sales figures are firming, however, they are still very much in a fragile state and we are continuing to see consumer sentiment suffering, particularly as a result of ongoing economic uncertainty both at home and abroad.”

Mr Comyn added that performance in the retailing space remained patchy and whilst a number of retailers were doing well, there were also many that were still hurting.

“With growth now starting to build momentum, the Reserve Bank would need to be cautious about any future decisions which could easily tip the balance back into negative territory.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that the BSI had consistently under-performed against the Australian Bureau of Statistics retail trade series over the past year but the period of under-performance appeared to have come to an end.

“The earlier tentative signs of improvement in spending are now being translated into firmer readings for the trend series,” said Mr James.

“In recent months, a key source of encouragement had been the fact that the majority of industry sectors were recording spending growth in trend terms. There was similar encouragement in the February data with only two of the 20 sectors reporting weaker spending in trend terms, down from three in January and four sectors in December.”

Industry analysis – improvement continues

Across the industry groups, the only sectors to record weaker spending in trend terms were Automobiles & Vehicles (which includes services stations as well as car and boat dealers, tyre and auto parts stores) with sales down 0.1 per cent, and Mail order & telephone order providers (down 0.9 per cent).

The strongest lift in spending in trend terms was by Repair services (up 2.2 per cent) followed by Amusement & entertainment (includes motion picture theatres, bowling alleys, golf courses and video stores), up 1.6 per cent. Encouragingly, the Business services sector has recorded consistent growth for the past 13 months.

State / Territory analysis – all post higher trend sales growth

There were no states or territories that recorded weaker sales in trend terms in February. The weakest result was seen in Queensland which recorded flat growth while Victoria was strongest with a 0.7 per cent rise.

Of the other states and territories, South Australia and Tasmania were both up 0.6 per cent, followed by ACT and NSW (both up 0.4 per cent), Western Australia (up 0.2 per cent) and Northern Territory (up 0.1 per cent).

“It is pleasing to see that spending growth has continued, however with lower levels of confidence and a continued reluctance to spend in larger amounts, it will take some time before we see a true recovery,” said Mr James.

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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.