Economy-wide spending rose in April but at the slowest pace in seven months, raising questions about the path of recovery.
The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.5 per cent in trend terms in April following a 0.6 per cent gain in March and growth of 0.8 per cent in January. Trend growth of spending has eased for the past four months.
In seasonally adjusted terms, spending fell by 1.3 per cent in April after gains of 0.7 per cent in March and 2.0 per cent in February. The seasonally adjusted and trend estimates of the BSI results are derived via the SEASABS statistical program from the Australian Bureau of Statistics.
At a sectoral level, six of the 20 industry sectors contracted in trend terms in April, up from five in March and up from four in February. And two of the eight states and territories recorded weaker sales in trend terms in April, a similar result to both February and March.
The Commonwealth 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 Commonwealth Bank business sales index raises doubts about how weak economy-wide spending really is. The BSI is certainly broader in coverage that the Bureau of Statistics retail trade series. It is also broader than household consumption figures, also from the ABS. But the data is only limited to transactions through Commonwealth Bank merchant facilities.
What the BSI appears to confirm is that consumers are much more focussed on “experiences” now, rather than just goods. People have their TVs, computers and phones are they are saying what next? As a result, people are spending more on travel, going to concerts and getting in in-home help.
What do the figures show?
According to the latest Commonwealth Bank Business Sales Indicator (BSI), economy-wide spending grew for the ninth straight month in April but the pace of growth has slowed. The BSI rose by 0.5 per cent in trend terms in April after rising by 0.6 per cent in March and lifting by 0.8 per cent in January 2012. Growth has slowed for the past four months and is currently the weakest in seven months. Before the latest recovery, the BSI contracted for seven straight months from January to July 2011.
In seasonally adjusted terms the BSI fell by 1.3 per cent in April after rising by 0.7 per cent in March and lifting by 2.0 per cent rise in February. In seasonally adjusted terms the BSI is 3.1 per cent above a year earlier, down from the 4.1 per cent annual growth rate in March which was the strongest annual growth in two years.
The Commonwealth 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 are derived from the same SEASABS statistical software. This allows analysis of the broader underlying trends that may be hidden in the raw data.
Across sectors, six of the industry sectors fell in April, up from five in March and up from four in February. The strongest monthly trend increase in sales occurred in the Amusement & Entertainment sector (up 2.3 per cent), followed by Wholesale Distributors & Manufacturers sector (up 2.2 per cent), Contracted Services (up 1.2 per cent), Mail Order & Telephone Order Providers (up 1.0 per cent) and Utilities (up by 0.8 per cent).
Amongst the weakest sectors in April was Hotels & Motels, down by 0.3 per cent, and the 10th straight decline. And sales in Business Services fell for the fifth straight month, down by 0.1 per cent.
In annual terms, five of the 20 industry sectors contracted in April, a similar result to both February and March. The weakest sector was Hotels & Motels (down 7.3 per cent) followed by Service Providers (down 1.8 per cent) and Automobiles and Vehicles (down 1.2 per cent).
At the other end of the scale, spending was strongest at Amusement & Entertainment (up 22.6 per cent), followed by Mail Order/Telephone Order Providers (up 17.2 per cent), Clothing Stores (up 10.2 per cent) and Transportation (up 7.2 per cent) and Contracted Services (up 6.6 per cent).
Two of the states and territories recorded weaker sales in trend terms in April. Sales in Tasmania fell by 0.6 per cent while sales fell 0.4 per cent in trend terms in the Northern Territory. The strongest result was in South Australia (up 1.0 per cent) followed by Queensland (up 0.8 per cent), ACT and NSW (both up 0.4 per cent), Victoria (up 0.3 per cent), Western Australia (up 0.2 per cent).
The trend BSI has now risen for 10 straight months in Queensland and for nine straight months in South Australia, NSW, Western Australia and Victoria. After seven straight months of gains, sales in the Northern Territory have fallen for the past three months.
In annual terms, only Tasmania had sales below a year ago (down 0.6 per cent). Of the other regions, strongest growth was in South Australia (up 9.7 per cent), followed by Queensland (up 7.3 per cent) and the ACT (up 4.7 per cent). After 22 months of declines, sales in NSW were 0.9 per cent higher than a year ago in April.
What is the importance of the economic data?
The Commonwealth 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. The BSI is a gauge of economy-wide spending.
What are the implications for interest rates and investors?
The latest data tells the Reserve Bank that spending is still occurring. But the transition from goods to services is painful as is the change in industry composition. Shops are empty as businesses work from warehouses and homes.
The Reserve Bank will certainly consider further rate cuts. It comes down to a matter of timing. CommSec expects another quarter of a per cent rate cut in August.
