Business sales strengthen, recording best result in four months
- Business Sales Indicator falls by 0.1% in trend terms
- Strength maintained in Amusement & Entertainment sector with 0.8% rise in trend terms; Government Services and Retail Stores slip by 0.3%
- Sector picture improves with seven of the 20 industry sectors contracting in August
- NT and TAS record positive gains; WA and SA fall
EMBARGOED UNTIL 00.01 hours 20 September 2011: Business sales improved in August, recording the strongest result for four months, 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% of the Australian market. The BSI fell by 0.1% in August, up from a 0.3% decline in July and 0.5% decline in June.
According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest figures were a welcome result in the midst of broader market uncertainty.
“Businesses across Australia are continuing to face testing times and whilst there isn’t any true strength in the numbers yet, it’s a start,” said Mr Comyn.
“We are seeing more stability in the market in terms of the outlook for interest rates which is helpful, however we are still living in volatile times and there continue to be a range of other factors preying on the consumer’s mind.”
“With both domestic and global markets continuing to behave erratically, longer-term stability will be needed to coax more money out of the consumer purse.”
Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said the August numbers were definitely encouraging in the current market.
“In seasonally adjusted terms the BSI actually posted a rise of 0.6% in August, the first positive reading since June and the strongest increase in spending in six months, said Mr James.
““There may be brighter times ahead for Australian businesses however the picture across the economy remains mixed. The Retail Stores sector looks set to continue its struggle yet there is positive news in that we are witnessing an ongoing shift in consumer behaviour with the Amusement and Entertainment sector posting consistent growth in sales.”
Industry analysis – sector weakness contracts
Seven sectors contracted in August, down from eight in July and nine in June. The weakest sector was Contracted Services (includes building trades such as electricians as well as veterinary services), down 0.8% in August and seeing the biggest fall in 18 months. Automobiles & Vehicles was down by 0.7% and sales at both Government Services and Retail Stores were down 0.3%.
Strength was maintained in Amusement & Entertainment (includes motion picture theatres, bowling alleys, golf courses and video stores), up 0.8% in trend terms in August, followed by Business Services (up 0.7%), Repair Services (up 0.6%) and Transportation (up 0.4%).
State / Territory analysis – performance continues to strengthen
Three of the states and territories recorded weaker sales in trend terms in August, down from five in July and six in June. The weakest result was in Western Australia (down 0.5%) followed by South Australia (down 0.4%) and Queensland (down 0.1%).
Of the other states and territories, strongest was Northern Territory (up 0.9%) followed by Tasmania (up 0.2%) and Victoria (both up 0.1%). Sales were flat in both the ACT and NSW in August. The ACT had shown consistent growth over the past 10 months before flattening last month.
“Based on current market behaviour, it’s very difficult to tell what sales performance will look like in the coming months,” said Mr James. “There are positive signs in the market such as growth in retail employment despite the difficulties facing the sector, however that also has to be weighed up with ongoing volatility we’re seeing at home and overseas which will continue to contribute to a cautious consumer attitude.”
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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% 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.