Spending expands at the fastest pace in 7½-years


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By CommSec

Commonwealth Bank Business Sales Index

  • The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 1.2 per cent in November after an upwardly revised 1.1 per cent lift in October. Spending is now expanding at the fastest pace in 7½-years.
  • Over the first six months of 2016, economy-wide spending grew on average by 0.2 per cent a month in trend terms; down from 0.5 per cent average monthly gains over 2015. But over the past four months spending has grown on average by 0.9 per cent a month.
  • Annual trend growth in sales rose from 5.5 per cent to 6.2 per cent in November – the strongest annual growth rate in a year.
  • The more volatile seasonally adjusted BSI rose by 2.8 per cent in November after falling by 0.4 per cent in October and lifting by 0.5 per cent in September.
  • At a sectoral level, 16 of the 19 industry sectors expanded in trend terms in November, up from 15 sectors in October. And sales rose in all eight states and territories in November.

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?

The latest lift in spending is certainly encouraging – particularly given that the strength in in the Business Sales Index (BSI) was broad-based. Not only did 16 of the 19 industry sectors see a lift in activity, but all states and territories were higher in the month. With confidence levels above long-term trends, there are good reasons to expect that the lift in broader-based spending should continue beyond the all-important Christmas period.

What does the data show?

  • The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 1.2 per cent in November after an upwardly revised 1.1 per cent lift in October. Spending growth had slowed earlier in the year ahead of the UK vote on European Union membership (‘Brexit’) and the Australian Federal Election. But spending is now expanding at the fastest pace in 7½-years.
  • Over the first six months of 2016, economy-wide spending grew on average by 0.2 per cent a month in trend terms; down from 0.5 per cent average monthly gains over 2015. But over the past four months spending has grown on average by 0.9 per cent a month.
  • Annual trend growth in sales rose from 5.5 per cent to 6.2 per cent in November – the strongest annual growth rate in a year.
  • The seasonally-adjusted measure of spending rose by 2.8 per cent in November after falling by 0.4 per cent in October and lifting by 0.5 per cent in September.
  • The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with its 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, 16 of the 19 industry sectors rose in trend terms in November.
  • One of the strongest gains occurred in Government Services with spending up 4.5 per cent in trend terms in November after lifting by 4.7 per cent in October and 4.2 per cent in September. Spending at Amusement & Entertainment was also strong – up 3.6 per cent in November – and followed a 3.9 per cent rise in October and 3.7 cent gain in September.
  • Spending fell most at Mail Order/Telephone Order Providers, down 1.1 per cent in November and the third straight decline. Transportation fell 0.2 per cent in November, the seventh straight decline.
  • In annual terms in November, only two of the 19 industry sectors contracted: Retail Stores and Transportation.
  • At the other end of the scale, sectors with strongest annual growth in November included: Government Services (up 23.1 per cent), Amusement & Entertainment (up 19.3 per cent), Wholesale Distributors & Manufacturers (up 14.3 per cent) and Hotels & Motels (up 13.6 per cent).
  • Across states and territories in November sales were stronger in all states and territories, strongest were NSW (up 1.8 per cent) followed by the ACT (up 1.4 per cent), Northern Territory & Queensland (up 1 per cent), Western Australia (up 0.9 per cent), South Australia (up 0.8 per cent), Victoria (up 0.7 per cent) and Tasmania (up 0.4 per cent).
  • In annual terms all states and territories has sales above a year ago. Strongest growth was in South Australia (up 9.3 per cent), from NSW (up 8.4 per cent), ACT (up 8.1 per cent), Western Australia (up 7.7 per cent), Queensland (up 6.9 per cent), Northern Territory (up 4.9 per cent), Tasmania (up 3.6 per cent) and Victoria (up 1.2 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?

CommSec expects no change in official interest rates for the foreseeable future.

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