SPENDING GROWTH EXTENDS INTO FOURTH YEAR
- Economy-wide spending grew in August in line with the long-term average rate of 0.5 per cent.
- Queensland notched up 38 months of continuous sales increases and South Australia, Tasmania and New South Wales also experienced strong growth in annual terms.
- Sales grew in 15 out of 19 industry sectors.
Spending continued to grow steadily across the economy in August, 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.
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 August BSI shows sales continuing to grow at around the same steady pace as the last six months — the 37th consecutive month of sales growth nationally.
Meanwhile, the more volatile seasonally adjusted measure grew by 0.8 per cent in August, down from a 1.6 per cent increase the month before. That saw the seasonally adjusted annual growth rate ease to 9.9 per cent, down from 11.9 per cent in July.
Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank, said the latest figures are generally positive for business-owners, although they continue to reflect the transition from a mining-led economy to a broader-based growth profile.
“Overall, the August BSI shows business conditions remain favourable across most of the country. This month’s results also reveal some unevenness between regions and sectors, as businesses continue to adjust to an economy in transition.
“For business owners, it is important to be aware of these variations to ensure they are planning ahead and proactively managing their businesses cash flow,” Mr Bennett said.
Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI report, said while there are still some areas of weakness, the overall business environment has improved.
“The latest job advertisement and unemployment data reflects a strengthening employment market, helping to underpin consumer spending. Both businesses and consumers have also been starting to take advantage of low interest rates, with lending growth continuing to recover.
“Much of that borrowing is being channelled into new housing and business investment, which should help to sustain further growth,” Mr James said.
South Australia and Queensland lead the way
During August sales rose across most of the country. South Australia was the strongest performing state for the fifth month in a row, recording growth of 1.4 per cent in trend terms, while sales in Queensland were up 1.1 per cent.
Spending has now risen for 38 straight months in Queensland, 30 months in Tasmania, 24 months in New South Wales and 23 months in South Australia. Sales in Victoria have been either flat or higher for 38 consecutive months. But sales growth in Western Australia has stalled over the last few months, with spending rising just 0.1 per cent in August after staying flat in July and falling 0.1 per cent in both May and June. Northern Territory spending was up 0.2 per cent.
Meanwhile, spending in the Australian Capital Territory fell in August, although the rate of decline slowed to only 0.1 per cent in trend terms.
Service Provider sector tops monthly growth
In trend terms, 15 out of 19 industry sectors saw sales rise during August, a similar result to the previous two months. For the second month in a row, Service Providers (includes financial institutions, insurance firms and brokers) reported the largest lift in sales, with spending up an impressive 4.0 per cent, following a 3.8 per cent rise in July. Mail Order/Telephone Order Providers also recorded healthy growth, with spending up 2.3 per cent.
Meanwhile, unseasonal weather continued to impact the Clothing Stores and Utilities sectors, with spending down 1.4 per cent and 1.7 per cent respectively.
In contrast, a number of sectors have seen sales grow by 20 per cent or more over the last 12 months, including Amusement & Entertainment, Transportation, Mail Order/Telephone Order Providers, Service Providers and Wholesale Distributors & Manufacturers. The strongest performer in annual terms was the Hotel & Motel sector, with a 12-month increase of 26.8 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 only cover 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, which is 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.