Mixed Christmas spending

Commonwealth Bank Business Sales Index

• The Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, rose by 0.4 per cent in trend terms in December. While this result is in line with the long-term average monthly growth pace, the performance was more mixed across sectors.
• At a sectoral level, 12 of 19 industry sectors rose in trend terms in December, up from 11 sectors in December. Sales rose across all the states and territories in the month.
• The annual trend sales growth eased from 5.8 per cent to a 12-month low of 5.3 per cent in December, although it remains in line with the long-term average pace.
• The more volatile seasonally-adjusted measure of the BSI fell by 0.8 per cent in December although this was only the second decline in the past eight months.
• 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?

• Spending across the economy is growing in line with longer-term averages. Big-ticket items like cars are experiencing softer sales in response to slower growth of home prices and outright declines in some cities.

What does the data show?

• Revisions have been made to the data collection procedures and analytical assessment methods for the Commonwealth Bank Business Sales Indicator. The revisions affect results published since March 2018.
• The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 0.8 per cent in trend terms in November after a 0.7 per cent increase in October and 0.6 per cent gain in September. Economy-wide sales have now lifted for 21 consecutive months.
• The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 0.4 per cent in trend terms in December after a 0.3 per cent increase in November and a 0.2 per cent gain in October. Economy-wide sales have now lifted for 22 consecutive months.
• The growth pace started lifting in March 2017 and over the period from October 2017 to January 2018 the BSI consistently recorded monthly gains of between 0.7-0.9 per cent a month. Growth in sales has held between 0.2-0.6 per cent a month for the past 11 months, picking up pace over November and December. Current growth is in line with the long-term average pace of 0.4 per cent.
• The annual trend sales growth eased from 5.8 per cent to a 12-month low of 5.3 per cent in December, although it remains in line with the long-term average pace.
• The more volatile seasonally-adjusted measure of the BSI fell by 0.8 per cent in December although this was only the second decline in the past eight months.
• 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, 12 of the 19 industry sectors rose in trend terms in December. Amongst the biggest gains in sales were Transportation (up 3.1 per cent); Hotels & Motels (up by 0.7 per cent); and Personal Service Providers (up 0.6 per cent).
• Sales fell most in Automobiles & Vehicles (down by 1.3 per cent); Mail Order/Telephone Order Providers (down by 1.0 per cent); and Government Services (down by 0.7 per cent).
• Encouragingly, Business Services was amongst the sectors to gain in December (up 0.4 per cent), and sales have now only fallen once in almost three years. And the 0.7 per cent lift in sales at Hotels & Motels extends the period of consecutive monthly growth to more than 5½ years.
• In annual terms in December, all but three of the 19 industry sectors recorded gains. Spending fell by 1.8 per cent over the past year in Government Services with Clothing down 1.3 per cent and in Automobile/Vehicle Rentals down 0.9 per cent.
• At the other end of the scale, sectors with strongest annual growth in December included Transportation (up 18.7 per cent); Airlines (up 11.7 per cent); and Hotels & Motels (up 11.6 per cent).
• Sales were stronger across all states and territories in December. The strongest growth occurred in Tasmania (up 0.9 per cent); NSW (up 0.6 per cent); ACT and Western Australia (both up 0.5 per cent). South Australia (up 0.3 per cent); Northern Territory (up 0.2 per cent); and Victoria and Queensland (both up 0.1 per cent).
• In annual terms all states and territories had sales above a year ago except Northern Territory (down 1.6 per cent). The strongest growth was in Tasmania (up 7.6 per cent); from Western Australia (up 6.4 per cent); Victoria (up 5.9 per cent); Queensland (up 5.7 per cent); NSW (up 4.8 per cent); South Australia (up 4.5 per cent); and ACT (up 2.0 per cent).

What is the importance of the report?

• The Commonwealth Bank releases its Business Sales Index (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. But it 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?

• Overall, spending continues to lift. But given the mixed nature of gains, the BSI highlights the importance for investors to focus on results by individual companies and industry sectors in the current climate.
• CommSec continues to expect stable interest rate settings until late in 2019.