SALES CONTINUE TO GROW, BUT AT A MORE SUSTAINABLE PACE

• Economy-wide spending grew steadily in April, to record the 21^st straight month of growth.
• New South Wales has overtaken Queensland to lead the nation with trend sales growth of 0.7 per cent.
• 11 of 19 industry sectors saw sales increase, with Amusement & Entertainment again leading the pack.

Spending continued to grow steadily across the economy in April, according to the Commonwealth Bank’s latest Business Sales Indicator (BSI). In trend terms, the BSI rose 0.5 per cent over the month, in line with the average monthly growth rate over the past decade. Spending has now grown for 21 straight months, the longest period of uninterrupted growth since the global financial crisis.

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. The April BSI shows sales growing at a slower but more sustainable pace, with monthly spending growth easing from 0.8 per cent in February and March to 0.5 per cent in April. Similarly, the annual growth rate has slowed to 9.5 per cent, down from 10.2 per cent in March.

Meanwhile, the more volatile seasonally adjusted measure lifted by 1.6 per cent in April, up from 0.7 per cent the month before. That saw the seasonally adjusted annual growth rate climb to 11.7 per cent, up from 9.8 per cent.

“Despite some uncertainty in the lead up to the Federal Budget, consumers have continued to spend, boosting turnover in most industry sectors. This month’s figures confirm that business conditions remain healthy around most of the country, with sales growing at a slower but more sustainable pace,” said Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank.

“Yet although the overall trend is healthy, not every sector has seen sales grow over the last month. So while this month’s figures are generally good news for business owners, they also highlight the importance of remaining well prepared for spending fluctuations,” said Mr Bennett.

Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI report, said that positive economic conditions will continue to create a solid foundation for future growth.

“The economy has outperformed government forecasts, with lower than expected unemployment and higher than anticipated levels of economic growth. Now that pre-budget jitters are out of the way, a low interest rate environment, employment growth and lifting home values should continue to support spending growth in 2014,” said Mr James.

Industry Analysis

Amusement & Entertainment continues to lead

Eleven out of 19 industry sectors saw sales rise in trend terms during April, down from 15 in March. For the fourth month in a row, Amusement & Entertainment businesses enjoyed the largest rises in sales, with spending up 3.2 per cent, following a 4.1 per cent rise in March. Hotels & Motels and Mail Order/Telephone Order Providers also recorded healthy rises, with spending in both sectors up 1.6 per cent.

However, sales were weaker across a number of sectors including Airlines, Transportation, Automobile & Vehicle Rentals, Automobiles & Vehicle sales and Clothing Stores.

The Amusement & Entertainment sector recorded the strongest annual sales growth, with spending up 58.2 per cent since April 2013. In contrast, Automobile & Vehicle Rental businesses experienced the largest annual spending drop, with sales down 2.1 per cent over the year.

State Analysis

New South Wales takes the lead

April saw sales rise across most of the country, with only the Australian Capital Territory experiencing a decline. New South Wales overtook Queensland to post the strongest result nationally, recording trend growth of 0.7 per cent. But Queensland and South Australia were close behind, with increases of 0.6 per cent each.

Meanwhile, spending in the ACT continued to contract, with a drop of 3.6 per cent in trend terms, the eighth consecutive drop. Spending in the ACT is now 25 per cent lower than a year ago, making it the only state or territory to see sales fall.

Elsewhere, annual sales have risen strongly, with every other state or territory enjoying healthy annual spending growth. South Australia remains the clear leader, posting growth of 29.2 per cent over the year in trend terms. Tasmania and the Northern Territory have also recorded double digit rises over the last 12 months, with spending rising 10.6 per cent in both regions.

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