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Businesses benefit as consumer spending lifts again
- Spending rose for the seventh straight month in March, rising by 0.4 per cent in trend terms
- Annual growth in spending stands at 4.9 per cent in trend terms
- Strongest monthly trend increase in the Service Providers and Professional Services sectors.
19 April 2013: Businesses have continued to benefit from an improvement in consumer spending with sales up for the seventh straight month in March, 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.
According to the BSI, spending increased at a slower pace across March, lifting by 0.4 per cent in trend terms following a rise of 0.7 per cent in February. This was the smallest gain in trend terms recorded by the BSI over the past six months and takes the annual growth rate to 4.9 per cent in trend terms.
In seasonally adjusted terms, a measure which is tends to be more volatile, spending grew by 1.3 per cent in March, following an increase of 0.3 per cent in February and 2.1 per cent lift in January. Annual growth now stands at 5.8 per cent in seasonally adjusted terms.
According to Adam Bennett, Executive General Manager, Local Business Banking, Commonwealth Bank, despite the modest slowdown in the growth rate in March, the continued upward trajectory in spending patterns paint an encouraging picture for businesses across the country.
“Although March saw the smallest gain in spending in six months, consumers are continuing to open their wallets and this should be taken as a positive sign for businesses. Consumer spending has increased for seven straight months now and businesses should take this a strong indication that consumers are willing to spend on a consistent basis.
“That said, not all industry sectors experienced sales growth in March. Whilst Service Providers and Professional Services performed well last month, Mail Order/Telephone Order Providers and Business Services experienced a drop in sales,” said Mr Bennett.
Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, believes the latest results show consumer confidence is starting to gain momentum.
“As March marks the seventh consecutive monthly increase in spending, we’re starting to see that consumers are becoming more confident and responding with increased spending. This is largely reflective of an overall positive outlook for the economy, which was reflected in the Reserve Bank’s decision to hold the cash rate steady in both March and April.
“With economic growth expected to be somewhat subdued over the next 12 months, businesses should remain confident but cautious, and prepare for potential fluctuations. However, the majority of business sectors continue to enjoy consistent growth and this month’s BSI should be seen as a positive sign for most Aussie businesses,” said Mr James.
Sector Analysis – Strongest monthly trend increase occurs in Service Providers
The strongest monthly trend increase in sales occurred in Service Providers (up 1.5 per cent) and Professional Services & Membership Organisations (up 1.3 per cent). Across sectors, five of the industry sectors fell in trend terms in March, up from four sectors in both January and February. Amongst the weakest sectors in March were Mail Orders & Telephone Order Providers (down 4.1 per cent), Business Services (down 0.7 per cent) and Government Services (down 0.5 per cent).
In annual terms, spending was notably higher in the Amusement & Entertainment (nfp) sector together with Wholesale Distributors and Manufacturers (up by 11.3 per cent), Retail Stores (up 8.3 per cent), Automobiles & Vehicles (up by 6.7 per cent) and Miscellaneous Stores (up 6.5 per cent).
In annual terms, just three of the 20 industry sectors contracted in March, a result that has prevailed since December 2012. Spending fell in Airlines (nfp), Mail Orders & Telephone Order Providers (down 21.7 per cent) and Business Services (down 0.5 per cent).
State Analysis – Sales rose most in SA and TAS
None of the states and territories recorded weaker sales in trend terms in March. Sales rose most in South Australia (up 1.5 per cent), followed by Tasmania (up 1.0 per cent), the ACT and Queensland (both up 0.8 per cent), Western Australia and Northern Territory (both up 0.7 per cent), Victoria (up 0.2 per cent) and NSW (up 0.1 per cent).
The trend BSI has now risen for 22 straight months in Northern Territory, for 21 straight months in Queensland, for 20 months in South Australia, for 18 straight months in ACT and for 12 straight months in Tasmania.
In annual terms, no state or territory had sales below a year ago. Strongest growth was posted in South Australia (up 12.6 per cent), followed by ACT (up 11.5 per cent), Tasmania (up 9.5 per cent) and Queensland (up 8.3 per cent)..
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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.
- 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. The Business Sales Indicator is tracked in seasonally adjusted and trend terms. The overall Index is measured in both seasonally adjusted and trend terms while state and industry data are measured using the less volatile “trend” approach. 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..
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