SPENDING SLOWS IN SEPTEMBER, BUT ANNUAL RESULTS STILL STRONG
- Economy-wide spending fell in September for the first time in 13 months.
- While seven of 19 industry sectors recorded lower sales in trend terms, 12 saw sales rise.
- The Amusement & Entertainment sector continued to outperform, with sales up 3.9 per cent.
- Results were mixed around the country, with four of eight states and territories stronger.
- While the Northern Territory recorded its 28th month of growth, sales in Western Australia fell again.
Economy-wide spending fell for the first time in 13 months in September, according to the latest Commonwealth Bank Business Sales Indicator (BSI). Despite the month-on-month decline, annual spending growth remains strong, with sales increasing 7.5 per cent in trend terms over the year to September, down from 7.8 per cent in August.
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 edged 0.1 per cent lower in trend terms in September, after rising by 0.1 per cent in August and 0.2 per cent in July. While this is the first time in 13 months spending has fallen, September was the fifth month in a row where the rate of spending growth has slowed.
The more volatile seasonally-adjusted measure of sales decreased by 1.4 per cent in September after posting a 2.5 per cent rise in August. In annual terms, the spending growth rate eased from 12.0 per cent to 5.3 per cent.
According to Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank, it’s not yet clear whether the figures indicate a new slowdown in spending or simply a temporary pause after more than a year of growth.
“The latest spending data shows the fifth decline in the pace of sales growth after spending posted a solid 1.1 per cent gain in April. The question is whether this slowdown in spending is a pause for breath or something entirely different.
“While total spending has fallen, 12 of the 19 industry sectors increased sales in September. For example, Amusement & Entertainment spending continues to grow, and there’s been an increase in spending on vehicles, which can be a strong indicator of consumer sentiment,” said Mr Bennett.
Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI, said improving economic conditions pointed to a period of stronger spending ahead.
“The improvement in consumer confidence following the Federal election should get a further boost from the latest employment data, which shows unemployment has fallen to 5.6 per cent in September, down from 5.8 per cent in August.
“Property prices in a number of capital cities have also made solid gains in recent months, potentially boosting confidence about personal finances and, in turn, spending. Interest rates are likely to remain at record low levels in the near term, so this should all contribute to healthy spending in the future,” said Mr James.
Industry analysis – Amusement & Entertainment continues to surge
The Amusement & Entertainment sector enjoyed another month of strong growth, with sales up 3.9 per cent in trend terms, following a 5.4 per cent jump in August and a 6.9 per cent increase in July.
Automobiles & Vehicles also performed well, up 1.2 per cent, while Wholesale Distributors & Manufacturers increased sales by 1.0 per cent.
Seven of the 19 industry sectors contracted in September, with Mail Order/Telephone Order Providers experiencing the biggest fall, down 2.1 per cent, while Utilities and Retail Stores both fell 1.1 per cent and 0.9 per cent respectively. Automobile & Vehicle Rentals fell 0.7 per cent, and Business Services and Repair Services both fell 0.5 per cent.
State and Territory analysis – South Australia posts largest lift in spending
Across the country, results were mixed, with half of the states and territories seeing sales improve.
South Australia was the top performer, up 2.6 per cent in trend terms to notch up a 26th consecutive monthly gain. The Northern Territory achieved its 28th monthly gain in a row, up 0.6 per cent. Meanwhile Tasmania and Victoria both added 0.2 per cent.
Western Australia continued to record a drop in spending (down 0.5 per cent in September), with sales falling for the fifth month in a row as the mining investment boom continues to wane.
However, in annual terms the news is more positive, with all states and territories gaining ground over the last 12 months. South Australia achieved the strongest growth (up 21.2 per cent), followed by the Australian Capital Territory (up 14.0 per cent). New South Wales and Tasmania have each added 8.6 per cent.
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 cover just 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 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 (IMCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment.