Sales strengthen as growth continues for retailers

  • Weakness remains narrowly based with just five industry sectors falling
  • Majority of industry sectors expanding rather than contracting
  • Automobiles & Vehicles / Amusement & Entertainment post positive gains
  • NSW and WA up; NT and VIC down

Sydney, 21 January 2010: Business sales have continued to strengthen moving into 2011, 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, was broadly unchanged in trend terms in December, the best reading for over a year. Weakness remains narrowly based, with only five of the 20 industry sectors recording weaker sales.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest figures are a further positive sign for businesses with the trend measure of the BSI improving over the past five months.

“It’s definitely better news, particularly for the biggest industry category of Retail Stores which has seen its fourth straight gain, rising by 0.5 per cent,” said Mr Comyn. “This was, however, against the backdrop of what appears to be disappointing overall Christmas sales.”

“We must also remain mindful of the impact of the recent flooding on small businesses operating in affected communities across Australia. For many, there will undoubtedly be negative short-term effects on business activity including continuing supply-chain disruptions and a tightening on cash flow. As consumers manage through the recovery, there is also likely to be an associated effect on business sales.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that the figures were pleasing particularly as there had been restrained business activity in late December in parts of New South Wales and Queensland.

“While growth in economy-wide spending remains elusive, the good news is that the majority of industry sectors are still expanding rather than contracting,” said Mr James.

“The BSI had previously fallen on a trend basis since December 2009, meaning that the latest figures paint a much better picture for business sales as we begin the New Year. The job market has strengthened in recent months in NSW, serving to boost business sales.”

Industry analysis – Automobiles & Vehicles post strong results

Across the industry sectors, the strongest gain was recorded by Automobiles & Vehicles, up by 0.9 per cent (which includes services stations, car and boat dealers) and Mail Order & Telephone Order Providers with a 0.9 per cent rise. However, despite the positive figures, both sectors contracted in annual terms in December, down 13.2 per cent and 12.7 per cent respectively on a year earlier.

Encouragingly, the Amusement & Entertainment sector (consisting of motion picture theatres, bowling alleys and golf courses) also benefited from the festive season, recording growth of 0.5 per cent in December, its best reading in 14 months.

The weakest sector in December in trend terms was Automobile & Vehicle rentals, down 1.2 per cent, followed by Miscellaneous Stores (down 0.8 per cent) and Hotels and Motels down just 0.1 per cent. Despite the minor drop, the growth rate in this sector has consistently weakened over the past six months.

At the other end of the scale, spending at Personal Service Providers was up 6.9 per cent on a year ago. Personal service providers include laundries, hairdressers, shoe repair and tax agents.

State / Territory analysis

Only two of the eight states and territories recorded monthly trend growth in December, down from three states and territories in November. New South Wales led the pack (up 0.6 per cent), followed by Western Australia (up 0.4 per cent) however spending was largely flat in the ACT and Tasmania.

Spending fell most in Northern Territory and Victoria (both down 0.8 per cent), followed by South Australia (down 0.4 per cent) and Queensland (down 0.1 per cent).

As it did in November’s BSI, the only State/Territory to record growth in December in annual terms was Western Australia, up 1.6 per cent. The other end of the scale was also dominated by the same States and Territories that recorded weakest readings on a monthly basis: the spending gauge was weakest in Victoria (down 10.6 per cent) followed by South Australia (down 8.8 per cent) and Northern Territory (down 7.1 per cent).

“Although we have seen positive movement from the latest BSI findings, this will need to be balanced against the wider market factors at work,” added Mr James. “This includes understanding the true impact of the recent floods as well as the anticipated rise in petrol prices, both of which will play a role in the performance of the BSI in the coming months.”

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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.