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Recovery underway as business sales continue to grow

Recovery underway as business sales continue to grow

  • Business Sales Indicator increases by 0.7 per cent in trend terms
  • Sector weakness improves with only three of the 20 industry sectors contracting in January
  • Wholesale Distributors & Manufacturers and Clothing Stores in positive territory; Hotels & Motels, Service Providers fall again
  • All States and Territories record gains for the fifth straight month; ACT leads again

20 March 2012: A firm recovery in spending appears to be underway across the country with business sales once again experiencing positive growth in February, 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 0.7 per cent in trend terms in February, following 0.9 per cent gains in December and January.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, despite a modest slowdown in the growth rate in February, the continued positive results would be welcomed by businesses, although it was clear they remained cautious.

“The figures demonstrate that the recovery is gathering momentum and the willingness to spend is becoming more defined every month,” said Mr Comyn.

“Consumers are showing resilience against the uncertainty we have been experiencing in domestic and global markets. The latest figures reveal that although their spending habits are still relatively meek by pre-GFC standards, the intention to continue spending is there and that bodes well for the economy.”

“What needs to be taken into consideration, however, is that confidence on the whole is still shaky. Despite this solid growth, consumers are spooked easily and that means that any significant negative economic news has the ability to change things very quickly.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that the recovery was continuing to be framed by the performance at a sector level and across States and Territories.

“When you look behind the headline figure at what is happening at a sector level, the overall picture is much more positive than what we saw over much of 2011,” said Mr James.

“The sectors where we had been hearing the most negative news were in fact the key beneficiaries of increased spending in February. Wholesale Distributors & Manufacturers posted positive gains, as did Retail Stores and Clothing Stores, both of which have been doing it tough.”

Industry analysis – struggling sectors show signs of improvement

Across sectors, only three of the industry sectors fell in February, with two other sectors – Automobile & Vehicles and Miscellaneous Services broadly flat. Wholesale Distributors & Manufacturers recorded the strongest gain in February (up 1.7 per cent) followed by Clothing Stores, Retail Stores and Contracted Services (all up 1.3 per cent) and Amusement & Entertainment (up by 1.1 per cent).

The weakest sector in February was Hotels & Motels (down 1.0 per cent) followed by Mail Order & Telephone Order Providers and Business Services (both down 0.3 per cent). It was the first decline in sales for Mail Order & Telephone Order Providers after 12 months of gains. Spending at Miscellaneous Services has been flat for two months after five months of gains.

State / Territory analysis – positive across the board

For the fifth straight month, none of the states and territories recorded weaker sales in trend terms, although the BSI for Western Australia was largely flat. The strongest results were in the ACT and South Australia (both up 1.1 per cent) followed by Northern Territory (up 0.8 per cent), Queensland and Victoria (both up 0.7 per cent), NSW (up 0.4 per cent) and Tasmania (up 0.3 per cent).

The trend BSI for Northern Territory has now risen for eight 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 seven straight months except ACT (up for five months) and Western Australia (flat after six monthly gains).

“Consumers will want to see more good news if they are to increase the amount they spend,” said Mr James. “Greater signs of stability in Europe, job growth and calmer financial markets are all key influences on sentiment. However, there are those that are willing to keep spending without such factors and it’s these individuals that are helping to keep the hopes of a sustained recovery alive.”

– ENDS –

Media Inquiries:

Tim Mullen
Phone: 02 9118 1667 / 0424 141 483

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 seasonally adjusted and trend estimates of the BSI results are derived via the SEASABS statistical program from the Australian Bureau of Statistics.
  • 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.