CONSUMERS LIFT SPENDING IN LEAD-UP TO CHRISTMAS
- Economy-wide spending lifted for the 14th month in a row in October.
- The Automobiles & Vehicles sector recorded the strongest growth, up 1.5 per cent.
- Six of the eight states and territories experienced spending growth, with South Australia leading the gains.
Economy-wide spending lifted for the 14th consecutive month in October, 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.
In trend terms, the BSI rose 0.4 per cent in October, following an identical rise in the previous month, after the September trend figures were revised to reflect new spending data. The October results also show that the pace of spending growth has stabilised over the last few months, after slowing between March and August.
Looking at the more volatile seasonally adjusted data, spending increased by 4.1 per cent in October, reversing September’s 1.4 per cent decline. This takes seasonally adjusted annual growth to 10.7 per cent in October, up from 5.6 per cent in September.
According to Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank, the findings are a sign that increasingly confident consumers could be ready to spend more freely in the lead-up to Christmas.
“With consumer confidence improving and property values rising strongly, the outlook for household spending is looking increasingly healthy. That’s good news for retailers, especially with the critical holiday trading period just around the corner,” said Mr Bennett.
Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI, said a number of economic factors could help to support continued spending growth.
“While the labour market is still relatively soft, the unemployment rate has remained largely steady over the past six months, rather than moving higher.
“There has been continued focus on rising property prices and high auction clearance rates in some capital cities, which can have the effect of boosting consumer confidence and spending. Additionally, the Reserve Bank’s decision to keep interest rates on hold in November means that home owners are continuing to enjoy the benefits of record low interest rates,” said Mr James.
Despite this, Mr James cautions that it’s not all positive for Australian business owners.
“Business sentiment has dropped, following the post-election boost, indicating that businesses are still facing tough conditions — and this is particularly the case for those affected by the high Australian dollar.
“However, over coming months, we should see low interest rates, rising consumer sentiment and improving housing activity continuing to support business conditions. What’s more, over the next year, we expect the Australian dollar will continue to ease, providing some relief for manufacturers and exporters,” said Mr James.
Industry analysis – Automobiles & Vehicles sector continues to grow
In trend terms, 15 of the 19 industry sectors expanded in October, with the Automobiles & Vehicles sector continuing to grow, lifting 1.5 per cent, following the same rise in September.
The Amusement & Entertainment sector has continued to grow, with a spending increase of 1.3 per cent in October. While this is a strong result, it was somewhat lower than the increases it had enjoyed in previous months, including a 4.1 per cent jump in August and a 2.5 per cent increase in September.
Among the four industry sectors where spending fell, Mail Order/Telephone Order Providers suffered the biggest loss, down 1.8 per cent, following a fall of 2.2 per cent in September. Automobile & Vehicle Rentals were also lower, down 0.4 per cent, while Utilities and Retail Stores each declined 0.3 per cent.
State and territory analysis – South Australia going strong
South Australia again led the gains, with growth of 3.6 per cent. The Northern Territory was up 1.2 per cent with its 28th consecutive rise, while Victoria added 0.8 per cent. Western Australia posted its first gain in six months, with spending increasing 0.6 per cent. Meanwhile, Tasmania (up 0.5 per cent) and the Australian Capital Territory (up 0.2 per cent) continued to make modest gains.
Queensland was the only state or territory where spending fell, down 0.1 per cent. Meanwhile spending remained flat in New South Wales.
About the Commonwealth Bank Business Sales Indicator
- The Commonwealth Bank Business Sales Indicator (BSI) is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia.
- The BSI has been devised to provide a monthly assessment of spending trends in the Australian economy (covering 19 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 BSI is tracked in seasonally adjusted and trend terms. The overall BSI is measured in both seasonally adjusted and trend terms while state/territory 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 BSI 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 only cover spending at retail establishments, and exclude spending at a raft of other businesses.
- The BSI includes transactions made at traditional retail establishments such as supermarkets, clothing stores, cafes and restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure, which is released on a quarterly basis. The BSI 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 BSI 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.