BUSINESS SPENDING LIFTS AGAIN IN JUNE

• Spending at Business Services enterprises rose 2.0 per cent in June – the strongest increase in more than three years.
• Lift in business spending drove economy-wide sales, which rose by 0.7 per cent in June.
• Annual growth in economy-wide sales remained well above the long-term trend, up 7.6 per cent in the year to June – the fastest pace in seven months.

Australian businesses continue to respond well to Government stimulus measures, with June sales experiencing growth at a solid pace, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

The Business Services sector, which recorded the strongest sales increase in three years in May, has seen further growth in June with sales rising 2.0 per cent. This surge has had a knock-on effect on nationwide spending, which also rose 0.7 per cent in trend terms.

Annual growth of economy-wide sales lifted for the fourth consecutive month in June, rising 7.6 per cent – the fastest pace in seven months and well above the decade-average trend of 5.3 per cent.

“June’s BSI provides a solid indication that now is a promising time for Australian businesses. Sales figures continue to reach record highs with businesses and consumers more confident about the economic outlook,” said Claire Roberts, Executive General Manager, Local Business Banking, Commonwealth Bank.

“A combination of low interest rates and reduced unemployment has resulted in a positive end to the 2014-15 financial year and businesses should be optimistic about what the next 12 months will bring,” Ms Roberts said.

Craig James, Chief Economist at CommSec and author of the BSI report, said that in light of recent international events, June’s sales figures imply the Australian economy is gathering strength as sales continue to lift.

“Despite recent global economic uncertainties such as the Greek debt crisis and China’s slowing economy reducing demand for Australian resources, it’s encouraging to see businesses and consumers embrace low interest rates and government stimulus, with spending growing at a steady pace.”

Industry analysis

In addition to the Business Services sector, which notably recorded the strongest monthly growth in over three years, other industry sectors that saw an increase in sales in June were Amusement & Entertainment (up 2.6 per cent); Automobiles & Vehicles (up 1.3 per cent); Wholesale Distributors & Manufacturers (up 1.2 per cent); and the large Retail Stores sector (up 0.5 per cent after rising 0.6 per cent in the previous eight months).

Only four of the 19 industry sectors recorded contractions in sales in trend terms throughout June, including Airlines (down 0.7 per cent); Mail Order/Telephone Order Providers (down by 4.6 per cent); Professional Services & Membership Organisations (down 1.4 per cent); and Transportation (down by 0.3 per cent).

State by state analysis

Sales rose in all states and territories in June with the exception of Northern Territory, which was down by less than 0.1 per cent. South Australia saw the most sales growth (up 1.1 per cent), followed by Queensland (up 0.8 per cent), NSW (up 0.7 per cent), Victoria and Western Australia (both up 0.6 per cent), and Tasmania and ACT (both up 0.4 per cent).

In annual terms, NSW and Northern Territory were the only two states to record lower sales compared to June last year (down 5.6 per cent and 6.6 per cent respectively). In comparison, ACT experienced the strongest growth (up 14.2 per cent), followed by South Australia (up 8.4 per cent), Western Australia (up 7.7 per cent), Queensland (up 7.3 per cent), Tasmania (up 6.5 per cent) and Victoria (up 1.7 per cent).

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.

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