Commonwealth Bank Business Sales Index
Consumer spending slows.
- Economy-wide spending eased slightly in September after 13 months of gains. In trend terms the Commonwealth Bank Business Sales Indicator (BSI), fell by 0.1 per cent in September, the first drop since July 2012.
- 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?
- Perhaps Aussie consumers were too busy at home auctions or sprucing their homes up for sale, but the evidence suggests that fewer people were at shopping malls or generally spending their money.
- But with the election out of the road, the US budget and debt issues solved for now, consumer confidence lifting and with key sharemarket indexes at record highs, economy-wide spending should lift in coming months.
- Economy-wide spending fell for the first time in 13 months in September according to the latest Commonwealth Bank Business Sales Indicator (BSI). Spending fell by 0.1 per cent in the month after lifting 0.1 per cent in August and rising by 0.2 per cent in July. It was the fifth decline in the pace of sales after spending posted a solid 1.1 per cent gain in April. The question is whether the slowdown in spending is a pause for breath similar to the February-July 2012 experience or something entirely different.
- The seasonally-adjusted measure of sales fell by 1.4 per cent in September after rising by 2.5 per cent in August and the annual growth rate eased from 12.0 per cent to 5.3 per cent.
- 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, seven of the 19 industry sectors fell in trend terms in September. Spending fell most in Mail Order/Telephone Order Providers (down 2.1 per cent) followed by Utilities (down by 1.1 per cent), Retail Stores (down 0.9 per cent) Automobile & Vehicle Rentals (down 0.7 per cent) and both Business Services & Repair Services (both down 0.5 per cent).
- Amongst the strongest sectors in September were Amusement & Entertainment (up 3.9 per cent), Automobiles & Vehicle Sales (up 1.2 per cent) and Wholesale Distributors & Manufacturers (up by 1.0 per cent).
- In annual terms in September, only three of the 19 industry sectors contracted: Mail Order/Telephone Order Providers, Business Services and Automobile & Vehicle Rentals. In August, similarly only three of the sectors posted weaker sales than a year ago.
- At the other end of the scale, sectors with strongest annual growth in September included Wholesale Distributors & Manufacturers, Service Providers, Government Services and Amusement & Entertainment.
- Sales were clearly mixed across the country with four of the states and territories recording weaker sales in trend terms in September. Leading the declines was Western Australia (down by 0.5 per cent), followed by NSW (down 0.4 per cent), Queensland (down 0.1 per cent) and ACT (down less than 0.1 per cent).
- Sales rose most in South Australia (up 2.6 per cent), followed by Northern Territory (up 0.6 per cent) and Tasmania and Victoria (both up 0.2 per cent).
- The trend BSI has now risen for 28 months in the Northern Territory, for 26 straight months in South Australia, for 18 straight months in Tasmania and for 15 straight months in Victoria.
- In annual terms, no state or territory had sales below a year ago. Strongest growth was posted in South Australia (up 21.2 per cent) followed by ACT (up 14.0 per cent), NSW and Tasmania (both up 8.6 per cent).
- 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
- The Reserve Bank will watch the situation closely. If spending doesn’t lift, and at the same time if inflation is contained and the Aussie dollar lifts, then the Reserve Bank will be tempted to cut rates. Much will depend on the housing market. If demand for homes remains strong then the Reserve Bank will be reluctant to cut rates again.
- What is clear is that few if any companies have pricing power. Competition is not just provided by businesses in the same street or suburb but from across Australia and across the globe. Focus must be placed on marketing activities and cost control.
What does the data show?
- Economy-wide spending fell for the first time in 13 months in September according to the latest Commonwealth Bank Business Sales Indicator (BSI). Spending fell by 0.1 per cent in the month after lifting 0.1 per cent in August and rising by 0.2 per cent in July. It was the fifth decline in the pace of sales after spending posted a solid 1.1 per cent gain in April. The question is whether the slowdown in spending is a pause for breath similar to the February-July 2012 experience or something entirely different.
- The seasonally-adjusted measure of sales fell by 1.4 per cent in September after rising by 2.5 per cent in August and the annual growth rate eased from 12.0 per cent to 5.3 per cent.
- 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, seven of the 19 industry sectors fell in trend terms in September. Spending fell most in Mail Order/Telephone Order Providers (down 2.1 per cent) followed by Utilities (down by 1.1 per cent), Retail Stores (down 0.9 per cent) Automobile & Vehicle Rentals (down 0.7 per cent) and both Business Services & Repair Services (both down 0.5 per cent).
- Amongst the strongest sectors in September were Amusement & Entertainment (up 3.9 per cent), Automobiles & Vehicle Sales (up 1.2 per cent) and Wholesale Distributors & Manufacturers (up by 1.0 per cent).
- In annual terms in September, only three of the 19 industry sectors contracted: Mail Order/Telephone Order Providers, Business Services and Automobile & Vehicle Rentals. In August, similarly only three of the sectors posted weaker sales than a year ago.
- At the other end of the scale, sectors with strongest annual growth in September included Wholesale Distributors & Manufacturers, Service Providers, Government Services and Amusement & Entertainment.
- Sales were clearly mixed across the country with four of the states and territories recording weaker sales in trend terms in September. Leading the declines was Western Australia (down by 0.5 per cent), followed by NSW (down 0.4 per cent), Queensland (down 0.1 per cent) and ACT (down less than 0.1 per cent).
- Sales rose most in South Australia (up 2.6 per cent), followed by Northern Territory (up 0.6 per cent) and Tasmania and Victoria (both up 0.2 per cent).
- The trend BSI has now risen for 28 months in the Northern Territory, for 26 straight months in South Australia, for 18 straight months in Tasmania and for 15 straight months in Victoria.
- In annual terms, no state or territory had sales below a year ago. Strongest growth was posted in South Australia (up 21.2 per cent) followed by ACT (up 14.0 per cent), NSW and Tasmania (both up 8.6 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?
- The Reserve Bank will watch the situation closely. If spending doesn’t lift, and at the same time if inflation is contained and the Aussie dollar lifts, then the Reserve Bank will be tempted to cut rates. Much will depend on the housing market. If demand for homes remains strong then the Reserve Bank will be reluctant to cut rates again.
- What is clear is that few if any companies have pricing power. Competition is not just provided by businesses in the same street or suburb but from across Australia and across the globe. Focus must be placed on marketing activities and cost control.
