Commonwealth Bank Business Sales Index
- The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 0.1 per cent in June after similar gains from March-May. Strength in clothing stores was offset by weaker spending across Government and Amusement & Entertainment sectors.
- Over 2015 economy wide spending lifted by an average of 0.5 per cent a month in trend terms, compared with just 0.1 per cent a month over the first six months of 2016.
- Annual growth slowed from 4.6 per cent to 4.3 per cent. The more volatile seasonally adjusted BSI rose by 1.7 per cent in June after falling by 1.5 per cent in May.
- At a sectoral level, 14 of the 19 industry sectors expanded in trend terms in June, a similar result to May. And sales rose in five of the eight states and territories in June. One of the strongest gains occurred in Clothing Stores with spending up 1.3 per cent in trend terms in May and followed a 1.2 per cent lift in June – marking the best back to back growth in 4½ years
What does it all mean?
The latest data shows that economy-wide spending has stagnated in the past few months, with weaker spending especially across business and government sectors.
Interestingly the cold weather over the last couple of months has supported clothing sales. In fact sales at clothing stores rose 2.5 per cent in the past two months – marking the best back-to-back growth in 4½ years. It’s also important to note that spending lifted in all but five of the 19 industry groups in June with spending up in the majority of states and territories.
It is probably a case of being alert but not alarmed about the latest spending figures. The jobs data has highlighted similar caution with hiring in the past few months. With the election now out of the way it is likely that activity levels will lift in coming months.
What does the data show?
- The Commonwealth Bank BSI – a measure of economy-wide spending – rose by 0.1 per cent in June after similar gains from March to May.
- Analysis had been complicated in recent months. There was an extra day in February (leap year) and Easter occurred earlier this year. Easter Sunday occurred on March 27 – the earliest occurrence in eight years.
- But it has been clear that economy-wide spending growth had slowed. Over 2015 economy-wide spending lifted by an average of 0.5 per cent in trend terms, compared with just 0.1 per cent a month over the first six months of 2016.
- The annual growth of spending eased from 4.6 per cent to 4.3 per cent in June – the weakest annual growth in four years. The annual growth rate had held at above-normal levels of between 7.0-7.6 per cent between April and November 2015.
- The seasonally-adjusted measure of sales rose by 1.7 per cent in June after a 1.5 per cent fall in May and 2 per cent rise in April.
- 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, only five of the 19 industry sectors fell in trend terms in June: Amusement & Entertainment; Government Services; Hotels & Motels; Service Providers; and Contracted Services. Spending by Government Services fell by 1.8 per cent, the biggest fall in 15 months.
- One of the strongest gains occurred in Clothing Stores with spending up 1.3 per cent in trend terms in May and followed a 1.2 per cent lift in June – marking the best back to back growth in 4½ years. Spending at Repair Services rose by 0.4 per cent – the 28th straight monthly gain.
- In annual terms in June, four of the 19 industry sectors contracted including: Airlines, Retail Stores, Amusement & Entertainment and Automobiles & Vehicles.
- At the other end of the scale, sectors with strongest annual growth in June included: Hotels & Motels (up 14.6 per cent); Miscellaneous Stores (up 10.2 per cent); and Government Services (up 9.0 per cent).
- Across states and territories in June, sales fell just in Northern Territory (down by 0.5 per cent), and the ACT (down 0.1 per cent). Of the other states and territories, strongest was South Australia (up 0.6 per cent) followed by Western Australia (up 0.3 per cent), Queensland (up 0.2 per cent) and Victoria and Tasmania (both up 0.1 per cent). Sales in NSW were flat in June.
- In annual terms only Victoria had sales below a year ago (down 1.4 per cent). Strongest growth was in Tasmania (up 8.8 per cent), from ACT (up 7.2 per cent), NSW (up 7.1 per cent), South Australia (up 6.2 per cent), Western Australia (up 6.0 per cent), Northern Territory (up 4.6 per cent) and Queensland (up 4.4 per cent).
What is the importance of the report?
The Commonwealth Bank releases its BSI around the 20th each month. The data provides a broader perspective of consumer spending. The BSI 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 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.
What are the implications for interest rates and investors?
The economy may have lost some momentum through the election period. Now that the election is out of the way, the hope would be that activity levels lift from here.
Importantly household budgets continue to benefit from low interest rates and falling petrol prices. In addition improved job security should serve to lift activity in coming months.