Business sales continue their upward trajectory

  • Business Sales Indicator increases by 0.6 per cent in trend terms
  • Sector weakness remains contained with four of the 20 industry sectors contracting in January
  • Clothing Stores and Mail Order / Telephone Order Providers record consecutive gains; Hotels & Motels, Service Providers down
  • All States and Territories record gains for the fourth straight month; ACT posts best result


20 February 2012: Business sales continued to strengthen in January, with positive figures recorded across all States and Territories, 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 0.6 per cent in trend terms in January, following a 0.7 per cent gain in November and December.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the positive result was a welcome start to the New Year, with businesses benefiting from a continued rise in spending.

"Despite ongoing economic concerns being felt both here and overseas, sales figures in most industries are ticking up and have been for some time now", said Mr Comyn.

"That means that there is still a certain level of confidence amongst consumers – even if it is relatively weak – which is translating into spending activity. While the improvements are a good sign, there are a range of factors that contribute to consumer confidence; the ongoing fluctuations we are seeing in the global economy therefore make it difficult to forecast how strong the recovery will be.”

Mr Comyn also added that the figures were yet another reminder of the patchy performance of spending throughout the Australian economy.

"It's important to remember that these figures also look at a range of industries across the economy, so where we saw weakness in sectors such as Hotels & Motels, we also witnessed strength in Clothing Stores and, perhaps surprisingly, Retail Stores, which seems to have improved despite ongoing challenging conditions."

"It's likely that the disparity across sectors will continue, most likely for the remainder of this year at the very least. That means that companies will need to remain focused on driving greater productivity and efficiency if they are to remain competitive.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that the latest figures meant the Reserve Bank had received some validation for its decision not to cut rates in February.

“We have seen economy-wide spending growing again in January and the results also align with the Reserve Bank's view that activity in the services sector has generally proved stronger than physical goods sales,” said Mr James.

“The strength in business sales is apparent at both a sector and State and Territory level. In January there were only four sectors recording negative growth and for the fourth straight month, all of the eight states and territories recorded higher sales in trend terms.”

Industry analysis – retail stores a surprise performer

Strongest spending growth in January was recorded by Clothing Stores (up 2.3 per cent), followed by Mail Order & Telephone Order Providers (up 2.0 per cent) and Retail Stores (up 1.5 per cent). Notably, spending in the Government Services sector (up 0.9 per cent) has strengthened with growth the highest in nine months.

The weakest sector in January was Hotels & Motels (down 1.3 per cent) followed by Service Providers (down 0.7 per cent), Utilities (down 0.3 per cent), and Business Services (down 0.2 per cent). While spending in the Utilities sector fell for the seventh straight month, the rate of decline has narrowed since November.

State / Territory analysis – all State / Territories once again positive

For the fourth straight month, none of the states and territories recorded weaker sales in trend terms in January. The strongest result was in the ACT (up 1.6 per cent) followed by South Australia (up 1.0 per cent), Western Australia (up 0.9 per cent), Northern Territory (up 0.8 per cent), Tasmania (up 0.7 per cent), Queensland (up 0.6 per cent), Victoria (up 0.5 per cent), and NSW (up 0.3 per cent).

The trend BSI for Northern Territory has now risen for seven straight months but the growth pace has eased over the past two months. All other states and territories have recorded stronger trend spending growth for six straight months except ACT (up for four months).

“It appears that the growth many had hoped for has continued into the start of the year," said Mr James. "However, we will need to see ongoing improvements in consumer confidence for that trend to continue and for the associated benefits to be felt by a larger number of businesses."

*The method used to derive seasonally adjusted and trend estimates of the BSI results was changed this month to the SEASABS program from the Australian Bureau of Statistics. While there have been slight changes to previous results for the BSI, the broad trends over time have not changed.

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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.