Spending disappoints, as Queensland reverses course

  • Business Sales Indicator eases by 0.1 per cent in trend terms in March
  • Queensland affects overall national figures with trend sales down by 1.3 per cent
  • Five of the 20 industry sectors record weaker sales in March
  • Retail stores sales slows, recording a trend decline of 0.8 per cent
  • Sales in South Australia and Tasmania higher; NSW and Western Australia weaken

EMBARGOED UNTIL 00.01 hours 20 April 2011: Despite recording positive growth in February, business spending has eased on the back of negative Queensland sales figures, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

The BSI tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, a sample of approximately 40% (the largest share) of the Australian market. The BSI fell by 0.1 per cent in trend terms in March.

The more volatile seasonally adjusted figures show a 2.7 per cent fall in March after four months of gains including a 2.1 per cent increase in February.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest figures represent a setback, given signs of improvement in sales in recent months.

“Any signs of strength that we had previously witnessed now seem to have faded,” said Mr Comyn.

“The fact is that we are still faced with the same issues that have been affecting spending over the past two quarters. Consumers continue to be cautious and this was compounded further in March on the back of global events that have clearly caused further uncertainty. We’ve therefore seen an associated effect on the amount of money going through the tills.”

Mr Comyn added that recent results had been reflective of a spike in flood-related spending, however it was clear from the March numbers that this had dropped off.

“The surge in activity has softened and although it’s likely that spending on rebuilding will continue to occur, this will instead take place over a longer time period of time.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that there were still glimmers of hope in the recent results, with the majority of industry sectors recording spending growth in trend terms and only five of the 20 sectors reporting weaker spending in trend terms in March.

“The sector story is still looking good, however it has been disappointing to see that the biggest industry category of retail stores fell by 0.8 per cent in March,” said Mr James.

“Discounting is keeping down sales growth, and combined with lower levels of consumer sentiment, this is a sector which will continue to face an uphill battle.”

Industry analysis – Amusement & Entertainment sees lift

The strongest lift in spending in trend terms was by Amusement & entertainment (includes motion picture theatres, bowling alleys, golf courses and video stores), up 1.9 per cent in trend terms, followed by Repair services and Contracted services (both up 1.1 per cent). Encouragingly, the Business services sector has recorded consistent growth for the past 14 months.

Automobiles & Vehicle rentals recorded weaker spending in trend terms (down 0.5 per cent), together with Automobiles & Vehicle sales (includes services stations as well as car and boat dealers, tyre and auto parts stores), with sales down 0.2 per cent, and Government services (down 0.3 per cent).

State / Territory analysis – Queensland weakest

Three of the States and Territories recorded weaker sales in trend terms in March. The weakest result was in Queensland (down 1.3 per cent) with NSW down 0.9 per cent and Western Australia down 0.1 per cent.

Of the other states and territories, strongest was South Australia (up 0.8 per cent), followed by Tasmania and Northern Territory (both up 0.6 per cent), followed by ACT (up 0.5 per cent) and Victoria (up 0.4 per cent).

“As economic conditions at home continue to stabilise this will provide a more suitable environment for consumer spending,” said Mr James. “With an extended Easter period also falling over school holidays this year we may see some additional uptake in activity, however the cautious approach we are witnessing from consumers is unlikely to end anytime soon.”

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Media Inquiries:

Tim Mullen
Phone: 02 9118 1667

Mobile: 0424 141 483
Email: tim.mullen@cba.com.au

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.