Strongest quarterly spending boost in six years, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
Strongest quarterly spending boost in six years
- Economy-wide spending rose for the ninth consecutive month in May
- Annual growth is up 7.4 per cent in trend terms, marking the strongest growth since December 2007
- Retail Stores sector posts largest industry monthly gain in May
- NSW records biggest state/territory increase in spending
20 June 2013: Economy-wide spending posted the largest quarterly increase in six years, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
Spending grew by 1.0 per cent in trend terms in May, following on from a 1.2 per cent increase in April and 1.1 per cent gain in March. This is the largest quarterly increase since 2007. Annual growth now stands at 7.4 per cent in trend terms, up from 6.6 per cent in April.
The more volatile seasonally adjusted estimate of spending also increased by 5.2 per cent in May, the strongest gain in over five years. Annual growth now stands at 10.3 per cent in seasonally adjusted terms, up from 5.9 per cent in April.
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 Adam Bennett, Executive General Manager, Local Business Banking, Commonwealth Bank, the back-to-back gains are a positive sign that consistent spending patterns are forming.
“Business owners should be encouraged by the fact that spending lifted again in May, marking the ninth consecutive monthly gain. It’s particularly encouraging to see that spending in the Retail Stores sector, which makes up nearly one third of the BSI, rose by 2.3 per cent over the month of May, and is now up 12.9 per cent in annual terms.
“It would appear from the BSI data that consumers are feeling more confident, and a clear upward pattern in spending is emerging. This may have been boosted by the Reserve Bank’s decision to cut interest rates in May, and hopefully we’ll see this momentum in spending continue,” said Mr Bennett.
Savanth Sebastian, Economist at the Bank’s broking subsidiary CommSec, believes the ongoing growth is a sign consumers are more willing to open their wallets.
“We have now seen nine months of consistent economy-wide spending growth, in marked contrast to the weakness exhibited from May to September last year. This is good news for businesses across Australia, as it means consumers are more confident, and the earlier tentative signs of improvement in spending are now being translated into firmer readings,” said Mr Sebastian.
Industry Analysis – Retail Stores sector posts strongest gain
From an industry perspective, 13 of the 20 industry sectors saw an increase in spending across the month of May, following an increase across 15 sectors in April. The largest increase in May was recorded by the large Retail Stores sector, which makes up 31.5 per cent of the BSI data, which rose by 2.3 per cent in May. This was followed by the Utilities and Wholesale Distributors & Manufactures sectors, which both recorded a lift of 1.4 per cent.
Amongst the weakest sectors in May were Mail Orders & Telephone Order Providers (down 1.6 per cent) with Automobiles & Vehicles, Business Services and Hotels & Motels all losing 0.6-0.7 per cent.
In annual terms, strongest growth was recorded by the large Retail Stores sector, up 12.9 per cent on a year ago, while the Wholesale Distributors & Manufactures sector was up 11.0 per cent, followed by Utilities, up 9.2 per cent, and Government services, up 8.6 per cent.
State Analysis – NSW records largest lift in spending across May
None of the states and territories recorded a decline in sales across the month of May. The strongest monthly gains were experienced in New South Wales (up 1.9 per cent), followed by the Australian Capital Territory (up 1.5 per cent), South Australia (up 1.0 per cent) and Queensland (up 0.6 per cent).
The trend BSI has now risen for two years in the Northern Territory, for 23 straight months in both Queensland and South Australia, for 20 straight months in ACT and for 14 straight months in Tasmania.
In annual terms, no state or territory had sales below a year ago. Strongest growth was posted in the ACT (up 13.3 per cent), followed by South Australia (up 12.2 per cent), NSW (up 8.8 per cent), and Queensland (up 7.5 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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