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CBA Business Sales Indicator

CBA Business Sales Indicator

Economy-wide spending rose again in April, marking the 15th consecutive gain in trend terms.

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18.05.2018 03:58 PM

Spending lifts for 15th straight month
Commonwealth Bank Business Sales Index

Economy-wide spending rose again in April, marking the 15th consecutive gain in trend terms. The Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, rose by 0.9 per cent in trend terms in April. The BSI has now risen by 0.9-1.0 per cent a month for the last five months.

The annual trend growth in sales lifted from 7.7 per cent to 8.4 per cent – the fastest growth for 3½ years and above the decade-average pace of 3.3 per cent.

The more volatile seasonally adjusted measure of the BSI rose by 0.8 per cent in April after a 0.1 per cent gain in March.

At a sectoral level, 14 of the 19 industry sectors rose in trend terms in April, the same number as March. And sales rose in all of the states and territories in the month.

The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. The BSI covers spending broadly across the economy rather than just retail sales, including spending on automobiles, personal services and airlines.

What does it all mean?

Fundamentals support continued growth of spending. The latest piece of good news is that businesses are paying workers a little more in bonuses. While they can’t be relied upon, the payments are helping to defray higher living costs like electricity rates and petrol prices.

A key result in the latest business sales index is the ongoing lift in spending by tourism-dependent businesses.

What does the data show?

The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – lifted by 0.9 per cent in trend terms in April. The growth pace started lifting in September 2017 and for the past five months trend sales have lifted consistently by 0.9 per cent to 1.0 per cent a month.

Sales at pivotal retail and clothing stores (around a third of the BSI) lifted by 0.6 per cent in April. A year ago sales were falling.

Annual trend growth of the BSI rose from 7.7 per cent to 8.4 per cent in April.

The more volatile seasonally adjusted measure of the BSI rose by 0.8 per cent in April after a 0.1 per cent gain in March.

The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through the Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software. The seasonally adjusted and trend BSI results permit analysis of the broader underlying trends that may be hidden in the raw data. 

Across sectors, 14 of the 19 industry sectors rose in trend terms in April. Sales were down at Transportation (down 0.5 per cent), followed by Clothing stores (down 0.2 per cent), Utilities (down 0.1 per cent) and Airlines and Repair Services (both down by less than 0.1 per cent).

The biggest lift in sales occurred at Mail Order/Telephone Order Providers (up 1.2 per cent) from Hotels & Motels, Retail Stores and Service Providers (all up 0.7 per cent).

The lift in spending by Mail Order/Telephone Order Providers was the biggest in 28 months. Meanwhile spending at Hotels & Motels have now risen between 0.7-0.9 per cent a month for almost a year. Spending on these tourist accommodation establishments hasn’t fallen for the past five years, highlighting the strength of domestic and international travel.

In annual terms in April all but one of the 19 industry sectors recorded gains. Spending fell by 0.7 per cent over the past year in the Contracted Services sector.

At the other end of the scale, sectors with strongest annual growth in April included Retail Stores (up 15.3 per cent) from Transportation (up 10.3 per cent) and Hotels & Motels (up 9.5 per cent). 

Across all states and territories in April, sales were stronger. Strongest growth occurred in Victoria (up 1.2 per cent) from ACT (up 1.1 per cent); NSW and Queensland (both up 0.9 per cent); Tasmania (up 0.8 per cent); South Australia (up 0.5 per cent); Western Australia and Northern Territory (both up 0.4 per cent).

In annual terms all states and territories had sales above a year ago. Strongest growth was in Queensland (up 10.8 per cent); Western Australia (up 8.8 per cent); Victoria (up 8.5 per cent); Northern Territory (up 8.2 per cent); South Australia and the ACT (both up 7.8 per cent); Tasmania (up 7.6 per cent); and NSW (up 6.9 per cent).

What is the importance of the report?

The Commonwealth Bank releases its Business Sales Index around the 20th each month. The data provides a broader perspective of consumer spending. The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator 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.

What are the implications for interest rates and investors?

Consumers are confident, business conditions are the best in 20 years, governments are spending and interest rates remain low. One of the only things holding back spending is the higher fuel prices – potentially serving to crimp discretionary or non-essential spending.

CommSec continues to expect stable interest rate settings over coming months. But wage and price trends are being carefully watched.

Published by Craig James, Chief Economist, CommSec
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