SOLID SPENDING GROWTH CONTINUES IN THE NEW YEAR

• Economy-wide spending grew in January for the 17th consecutive month.
• 18 of 19 industry sectors saw sales rise, up from 17 sectors in December.
• Australian Capital Territory was the only state or territory where sales contracted.
• Transportation was the strongest sector, with monthly spending up 4.0 per cent.

Economy-wide spending continued to rise in January, maintaining the momentum from the final months of 2013, according to the latest Commonwealth Bank Business Sales Indicator (BSI). In trend terms, the BSI rose 1.0 per cent in January to record its 17^th consecutive month of growth, following similar monthly gains between October and December 2013.

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 January BSI reflects an ongoing recovery in consumer spending, with the annual growth rate now 10.8 per cent, its highest level in over six years.

The more volatile seasonally adjusted measure showed spending increased by 2.2 per cent in January. Annual seasonally adjusted growth advanced to 12 per cent in January, from 10.7 per cent the month before.

Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank, said, “These figures are great news for businesses looking to build up their cash reserves and begin 2014 on a positive note. Following healthy sales last year, they are further evidence of a broad-based recovery in spending.

“But it’s also important to remember that January is traditionally one of the strongest months of the year for many businesses, particularly in retail. To make the most of this opportunity and manage any future fluctuations, it’s important for business owners to continue to focus on sound cashflow management,” said Mr Bennett.

Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI, said there is room for further growth if consumer sentiment improves.

“Conditions are largely positive, with the Reserve Bank indicating that interest rates are likely to be left on hold in the medium term. The lower dollar is already making life easier for local exporters, and a pick-up in the housing market suggests it may be set to take over as a key-driver of the economy as mining investment declines.

“But consumers are still relatively cautious, with sentiment dipping again in February. As sentiment improves, there could be scope for spending to lift even further,” said Mr James.

Industry analysis

Transportation continues to lead growth

Spending grew in 18 out of 19 industry sectors in January, with Transportation the strongest performer, adding 4.0 per cent in trend terms. Once the trend figures are adjusted to reflect the latest data, the Transport sector has recorded the highest monthly growth of all the industry sectors over each of the past five months. The Hotels and Motels sector also grew strongly, up 2.6 per cent, while Utilities added 2.2 per cent.

Professional Services & Membership Organisations was the only sector to record a drop, falling 1.0 per cent in trend terms, after identical declines in November and December 2013.

In annual terms, the Amusement & Entertainment sector remains the most buoyant, with 42.8 per cent growth in spending in trend terms over the past 12 months.

State Analysis

Western Australia the top-performer

Across the nation, Western Australia posted spending growth of 1.7 per cent in trend terms in January. That saw South Australia slip from top position for the first time in nine months, with an increase of 1.5 per cent.

The ACT was the only state or territory where monthly spending declined, falling 4.3 per cent in trend terms. This was the fifth straight month spending has contracted in the nation’s capital, and the largest monthly decline seen by any state or territory in recent years. As a result, annual spending in the ACT has fallen by 4.8 per cent.

Meanwhile, all other states and territories have recorded gains over the last 12 months. South Australia leads the nation for annual spending growth, with sales up 33.2 per cent in the year to January 2014.

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