Spending growth across the Australian economy has slowed from the highs of the past three months, according the latest Commonwealth Bank Business Sales Indicator (BSI) released today.
The report, a key monthly indicator of the state of the national and state economies, showed that spending Australia-wide grew 0.1 per cent in trend terms in February, the slowest growth in two years. On an annual level, growth in sales stood at 5.0 per cent which is a decline from 5.3 per cent in January.
Craig James, Chief Economist at CommSec and author of the report, remains optimistic.
“While spending is rising more modestly, that was to be expected as the growth pace late last year was unsustainable,” said James.
“Looking ahead, consumer spending will be supported by low interest rates and the wealth effect of higher home prices. And business spending will be supported by the recent solid lift in profits and high cash levels.”
The more volatile seasonally adjusted BSI rose by 0.6 per cent in February after falling by 0.4 per cent in December and January. Annual growth stands at 4.5 per cent.
Previous reports showed that Brexit fears and uncertainties about the United States and Australian elections led to slower growth in local spending in mid-2016. Following this period, spending lifted at a 0.7-0.8 per cent trend pace between September to November last year before slowing over the past three months.
The BSI tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals. The BSI covers spending broadly across the economy rather than just retail sales, including spending on automobiles, personal services and airlines.
11 of the 19 industry sectors analysed rose in trend terms in February, with the strongest gains in sales occurring in Service Providers (up 1.4 per cent) and Automobiles & Vehicles (up 1.1 per cent). Other notable increases occurred in Hotels & Motels (up 0.9 per cent) and Professional Services & Membership Organisations (up 0.6 per cent).
The largest decline in sales was in Mail Order/Telephone Order Providers (down 0.9 per cent), Business Services (down 0.6 per cent) and Retail Stores (down 0.5 per cent).
In annual terms, the Hotels and Motels sector saw the strongest growth (up 15.1 per cent), followed by Service Providers (up 13.0 per cent) and Automobiles & Vehicles (up 12.8 per cent).
Only three of the analysed sectors contracted in annual growth. These were Mail Order/Telephone Order Providers, Transportation and Retail Stores.
State by state breakdown
Sales were stronger in five states and territories in February. The strongest was Tasmania (up 1.1 per cent), followed by Victoria (up 0.5 per cent), South Australia (up 0.4 per cent), Western Australia and Northern Territory (up 0.1 per cent). Spending was flat in Queensland and fell 0.3 per cent in New South Wales and was down 0.2 per cent in the Australian Capital Territory.
Spending has consistently increased in Western Australia for 69 months, for 67 months in South Australia and for 61 months in Tasmania.
In annual terms all states and territories had sales above a year ago. Strongest growth was South Australia (up 9.0 per cent), followed by the Australian Capital Territory (up 7.3 per cent), Tasmania (up 7.0 per cent), Western Australia (up 6.1 per cent), Queensland (up 5.8 per cent), New South Wales (up 4.5 per cent), Victoria (up 3.7 per cent) and Northern Territory (up 0.7 per cent).
Click here for more information or to request the latest Commonwealth Bank Business Sales Indicator.
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 by applying a statistical program.
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 (MCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment.