Recovery consolidates as business sales continue to rise

  • Business Sales Indicator increases by 0.8 per cent in trend terms in March
  • Sector weakness remains contained with three of the 20 industry sectors contracting in March
  • Wholesale Distributors & Manufacturers and Amusement & Entertainment record strongest gains; Hotels & Motels falls for ninth straight month
  • All States and Territories remain in positive territory, the sixth straight month of gains

20 April 2012: The recovery in economy-wide spending appears to have consolidated with business sales rounding out the first quarter of 2012 in positive territory, 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 0.8 per cent in trend terms in March, following a 0.9 per cent gain in February and 1.0 per cent increases in sales in both January and December.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the continued positive uplift in spending showed that consumers were happy to spend but that they were taking a different approach to where they allocated their money.

“Consumers’ spending patterns have shifted from where they were say one or two years ago and that is being driven by the fact we have become more used to dealing with a new economic climate,” said Mr Comyn.

“We’re seeing a change in the way consumers’ spend their money and it’s also clear they are becoming savvier shoppers. So the fact we are seeing sectors like Amusement & Entertainment posting continued positive gains shows that the experience is becoming more important. It’s a similar story in Mail Order & Telephone Order Providers, where ongoing positive performance speaks to the smarter shopper who is seeking out a bargain.”

“The latest figures have, however, also shown us that the Retail Stores sector expanded by 1.0 per cent in March, the eighth straight month of gains in sales above 1.0 per cent. This is pleasing as it points towards a recovery in a sector which continues to see its fair share of challenges.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that although consumers were still facing a number of economic hurdles, the latest figures pointed to a brighter outlook for business sales.

“Economy-wide spending has grown for the eighth-straight month which is significant,” said Mr James.

“The start of the recovery in August last year followed seven-straight months of contraction, so consumer spending has been gathering momentum for some time. As we’ve noted in previous releases, this is despite the fact that overall levels of consumer confidence remain low, so although people have a more negative view on the economy, that doesn’t necessarily mean we aren’t willing to spend.”

Industry analysis – sector weakness remains contained

Across sectors, only three of the industry sectors fell in March, the same result as February but up from the January result where two sectors contracted. The strongest monthly trend increase in sales occurred in the Wholesale Distributors & Manufacturers sector (up 1.8 per cent), followed by Amusement & Entertainment sector (up 1.4 per cent), Utilities and Contracted Services (both up 1.3 per cent). The 1.3 per cent lift in Utilities is notable as it was the strongest increase in 40 months.

The weakest sector in March was Hotels & Motels, down by 0.3 per cent and the ninth-straight decline, although the rate of decline has slowed. The Hotels & Motels sector was followed by Mail Order & Telephone Order Providers, down 0.2 per cent, and the second straight decline. Sales in Business Services fell for the fourth straight month by 0.1 per cent.

State / Territory analysis – positive story continues

For the sixth straight month, none of the states and territories recorded weaker sales in trend terms in March. The strongest result was in South Australia (up 1.5 per cent) followed by ACT (up 1.3 per cent), Queensland (up 1.1 per cent), Victoria (up 0.8 per cent), NSW and Western Australia (up 0.6 per cent), Northern Territory (up 0.2 per cent) and Tasmania (up 0.1 per cent).

The trend BSI for Northern Territory has now risen for nine straight months but the growth pace is now the weakest over that period. All other states and territories have recorded stronger trend spending growth for eight straight months except Victoria (seven monthly gains) and ACT (up for six months).

“There’s little question we are in a far more positive place than we have been for some time,” said Mr James. “There are, however, a number of economic announcements on the horizon that have the ability to further sway the consumer mood, including the next Reserve Bank meeting and Federal Budget in May, so the April and May figures will be particularly telling.”

– ENDS –

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Tim Mullen
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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 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.