SPENDING LIFTS IN JULY, BUT GROWTH BEGINS TO SLOW
- Spending lifts in July, but at the slowest rate in 10 months.
- Annual growth lifts to highest level seen in over five years.
- Utilities and Business Services experience biggest drop in sales across July.
- WA was the only state to record weaker sales in trend terms in July.
Economy-wide spending continues to rise, albeit at the slowest pace in 10 months, 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.
Whilst spending lifted by 0.2 per cent in trend terms in July, it was the slowest pace since September 2012. The increase in spending marked the 11th consecutive month of growth, but was down from the 0.6 per cent increase recorded in June and 0.8 per cent growth in May. In annual terms, growth lifted from 7.5 per cent to 7.9 per cent, which is the highest level in five and a half years.
The more volatile seasonally adjusted measure of sales fell by 2.0 per cent in July after dropping by 2.1 per cent in June, and expanding by 5.4 per cent in May. However, annual growth in spending remains firm, lifting to 6.9 per cent in July, up from 4.4 per cent in June.
According to Adam Bennett, Executive General Manager, Local Business Banking, Commonwealth Bank, while the latest results aren’t as positive as anticipated, businesses should still be encouraged by the back-to-back sales gains.
“While we are still operating within a softer economic environment, many business sectors have seen an upturn in sales in 2013. Although the pace of growth slowed in July, we have now seen consistent increases for 11 months.
“For many businesses there are still positives to be taken from the July results. The overall annual growth is still solid, and the majority of states and territories are still posting positive gains. What this tells us is that there is still spending momentum, albeit at a slower pace.”
Craig James, Chief Economist at the Bank’s broking subsidiary CommSec, said:
“While the overall sentiment is subdued, businesses should be encouraged by the positive economic indicators we’re currently experiencing. We’ve seen pockets of strength in new housing developments across the major capital cities and modest improvement in the manufacturing sector as well.
“This, coupled with the decision by the Reserve Bank to lower the official cash rate to historical lows this month, means consumer sentiment should remain positive throughout the coming months and hopefully that will translate into a boost in spending pace.”
Industry Analysis – Amusement & Entertainment and Mail Order/Telephone Order Providers amongst strongest sectors in July.
Across sectors, 13 of the 19 industry sectors increased in trend terms in July. Amongst the strongest sectors in July were Amusement & Entertainment (up 6.0 per cent) and Mail Order/Telephone Order Providers (up by 2.5 per cent).
Spending fell in Utilities (down by 1.6 per cent), followed by Business Services (down 1.4 per cent), Transportation, and Automobile & Vehicle Rentals (both down 0.4 per cent), Repair Services, and Hotels & Motels (both down by 0.2 per cent).
State and Territory Analysis – ACT records largest lift in spending across July.
Sales in July rose most in the Australian Capital Territory (up 1.0 per cent), followed by Tasmania (up 0.6 per cent), Queensland (up 0.5 per cent), New South Wales (up 0.3 per cent). Trend sales in Victoria and the Northern Territory both rose by less than 0.1 per cent.
Western Australia was the only one of the states and territories to record weaker sales in trend terms in July. Sales in Western Australia have softened markedly in recent months, with spending contracting 0.6 per cent in trend terms in July, after declines of 0.4 per cent in June and 0.1 per cent in May.
In annual terms, no state or territory had sales below a year ago. Strongest growth was posted in the Australian Capital Territory (up 15.0 per cent), followed by South Australia (up 11.4 per cent), New South Wales (up 9.5 per cent), and Tasmania (up 8.5 per cent).
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 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 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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