Spending recovery strengthens, although caution remains
- Business Sales Indicator increases by 0.3 per cent in trend terms
- Sector picture strengthens further with four of the 20 industry sectors contracting in November, down from five in October
- Clothing stores performs strongly; Hotels & Motels records weakest result
- All States record gains; ACT returns to positive territory
20 December 2011: Consumers have continued to increase their appetite for spending, once again opening their wallets in November, 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 per cent of the Australian market. The BSI rose by 0.3 per cent in November, following similar gains in both September and October.
According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, although the overall consumer attitude remained cautious, the uplift in sales continued to be a good news story as retailers prepared for the Christmas sales period.
“The fact that consumers are more willing to spend now than they were earlier this year is a positive sign, particularly for this time of year,” said Mr Comyn.
“The November figures factor in the first rate reduction witnessed this year, so it’s possible that the latest announcement from the Reserve Bank this month may act as a trigger to encourage additional spending. However, the reasons behind the decision, namely the crisis in Europe, will also have an impact on the consumer mood.”
“It has been a tough year for a large number of Australian businesses. As a result, many will be looking to capitalise on what they hope will be a busier trading period as shoppers visit stores to make Christmas-related purchases. The December figures – to be released in January 2012 – will be important in understanding how willing consumers were to spend this festive season or if their conservative nature continued to be entrenched, in turn constraining more defined growth in business sales."
Savanth Sebastian, Economist of the Bank’s broking subsidiary CommSec, commented that the stop-start nature of the spending recovery was highlighted through the latest figures.
“The seasonally adjusted measure of the BSI lifted by 0.6 per cent in November after a 0.2 per cent decline in October, showing that consumers clearly aren’t convinced they should be splashing out,” said Mr Sebastian.
“Despite that, it’s still good news, with the seasonally adjusted BSI now having risen in three of the last four months. The question will be whether there is enough momentum to carry this recovery on into the New Year, particularly as the Eurozone continues to grapple with its ongoing debt issues. Decisive action by Governments to shore up confidence overseas will also have an impact here at home, so it’s very much a wait-and-see scenario.”
Industry analysis – sector weakness contracts yet again
The number of sectors reporting weaker sales eased from five in October to four in November. Another two sectors once again recorded flat growth. Clothing stores recorded the strongest gain in November (up 1.0 per cent) followed by Professional Services and Membership Organisations (up 0.8 per cent) and Retail Stores, Mail Order/Telephone Order Providers and Contracted Services (all up 0.7 per cent).
In annual terms, six of the 20 industry sectors contracted in November, a similar result to October. The weakest sector in November was Hotels & Motels (down 0.7 per cent) followed by Utilities (down 0.6 per cent) and Miscellaneous Stores (down 0.2 per cent).
State / Territory analysis – all State / Territories strengthen
None of the States and Territories recorded weaker sales in trend terms in November as the ACT returned to positive territory in the month. Spending in the ACT fell by 0.2 per cent in October but rose 0.1 per cent in November.
The strongest result was in Northern Territory (up 0.4 per cent) followed by NSW, Tasmania, Western Australia, Victoria and South Australia (all up 0.3 per cent). Spending in Queensland rose just 0.1 per cent. The trend BSI for Northern Territory has now risen for eight straight months, with Queensland, South Australia and Western Australia also now having recorded stronger trend spending growth for five straight months.
“Further encouraging news came in lending data out this month which shows that the latest rate cut has influenced consumers to increase their levels of personal borrowings,” said Mr Sebastian. “However, this has also been tempered by recent weak readings on consumer sentiment as global headlines continue to stay front of mind. The forecast wet weather is also likely to ensure that growth in retail activity will be modest.”
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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 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.