• In line with anecdotal evidence, consumer spending strengthened in February. The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.5 per cent in trend terms in February, ahead of a slightly smaller gain in January and the strongest result in 18 months. Of further encouragement only two of the 20 industry sectors recorded weaker sales in February, down from three sectors in January and four sectors in December.
• In seasonally adjusted terms the BSI rose by 0.4 per cent in February – the third gain in four months.
• 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 had consistently underperformed against the Australian Bureau of Statistics retail trade series over the past year but the period of under-performance appears to have come to an end.

What does it all mean?

• The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.5 per cent in trend terms in February after a gain of just under 0.5 per cent January. The BSI is now recording the strongest monthly growth in 18 months.
• The BSI had consistently under-performed against the Australian Bureau of Statistics retail trade series over the past year but the period of under-performance appeared to have come to an end. The earlier tentative signs of improvement in spending are now being translated into firmer readings for the trend series.
• The trend estimates are constantly revised with the addition of new data. And it is clear that the tentative signs of improvement in spending identified in recent months are now being translated into firmer readings for the trend series. Previously, spending was shown to have declined by 0.2 per cent in trend terms in January, but the revised figures are now showing growth of almost 0.5 per cent.
• In recent months, a key source of encouragement had been the fact that the majority of industry sectors were recording spending growth in trend terms. There was similar encouragement in the February data with only two of the 20 sectors reporting weaker spending in trend terms, down from three in January and four sectors in December.

What do the figures show?

• The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.5 per cent in trend terms in February after a gain of just under 0.5 per cent January. The BSI is now recording the strongest monthly growth in 18 months.
• The trend estimates are constantly revised with the addition of new data. And it is clear that the tentative signs of improvement in spending identified in recent months are now being translated into firmer readings for the trend series. Previously, spending was shown to have declined by 0.2 per cent in trend terms in January, but the revised figures are now showing growth of almost 0.5 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. This allows analysis of the broader underlying trends that may be hidden in the raw data.
• In seasonally adjusted terms the BSI rose by 0.4 per cent in February after an upwardly revised increase of 2.4 per cent in January.
• In recent months, a key source of encouragement had been the fact that the majority of industry sectors were recording spending growth in trend terms. There was similar encouragement in the February data with only two of the 20 sectors reporting weaker spending in trend terms, down from three in January and four sectors in December. And the biggest industry category – retail stores – rose by 0.9 per cent in February, the sixth straight gain.

• Across the industry groups, the only sectors to record weaker spending in trend terms were Automobiles &  Vehicles (includes services stations as well as car and boat dealers, tyre and auto parts stores) with sales down 0.1 per cent, and Mail order & telephone order providers (down 0.9 per cent).
• The strongest lift in spending in trend terms was by Repair services (up 2.2 per cent) followed by Amusement & entertainment (includes motion picture theatres, bowling alleys, golf courses and video stores), up 1.6 per cent. Encouragingly, the Business services sector has recorded consistent growth for the past 13 months.
• In annual terms, just five of the 20 industry sectors contracted in February, down from seven sectors in January. The weakest sector was Mail Order and Telephone Order Providers (down 15.7 per cent on a year earlier), followed by Automobile & vehicles (down by 10.6 per cent) and Miscellaneous stores (down 8.1 per cent).
• At the other end of the scale, spending at Contracted services (includes building trades such as electricians as well as veterinary services) was strongest, up 9.3 per cent, followed by Professional services & membership organisations, up by 8.6 per cent.
• None of the states and territories recorded weaker sales in trend terms in February. The weakest result was in Queensland (flat) while Victoria was strongest with a 0.7 per cent rise. Of the other states and territories, next strongest were South Australia and Tasmania (both up 0.6 per cent), followed by ACT and NSW (both up 0.4 per cent), Western Australia (up 0.2 per cent) and Northern Territory (up 0.1 per cent)
• In annual terms, the only state/territory to record growth in February was NSW (up 2.5 per cent). At the other end of the scale, the spending gauge was weakest in South Australia (down 7.2 per cent), Northern Territory (down 7.1 per cent) and Queensland (down 7.0 per cent).

What is the importance of the economic data?

• The Commonwealth Bank Business Sales Indicator is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia. Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
• The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

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• Credit card balances are growing at the slowest annual pace in 16 months. The average credit card balance in January was up just 0.8 per cent on a year ago. The average balance fell by $100.90 to $3,214.00.
• Consumers are preferring to use their own money to purchase goods. Purchases made on debit cards rose by 25.8 per cent on a year ago – the fastest growth on record.
• Petrol prices are likely to track higher in coming weeks. The national average wholesale (terminal gate) stands at a near 29-month high of 134.8 cents a litre today, up a further 2.2 cents a litre over the past week.

What does it all mean?

• Consumers continue to remain ultra conservative. The average credit card balance is barely growing at present with consumers much preferring to live within their own means. The average balance is up just 0.8 per cent on a year ago, the slowest annual pace in 16 months. And once inflation is taken into account, the average credit card balance is actually going backwards.
• Aussie consumers are increasingly using their own money (debit cards) to make purchases rather than put them on credit. Purchases made on using debit cards are up almost 26 per cent on a year ago – the fastest pace recorded.
• The news for retailers isn’t good. The price of petrol is going up, acting like a de facto rate hike. At the same time, consumers continue to shun discretionary spending, added to which the recent losses on equity markets will be a further dampener on spending – both in terms of confidence and actual income levels.
• It is a public holiday in Canberra today and the usual data on retail petrol prices will be released tomorrow. However the sustained increase in the terminal gate (wholesale) price suggests that pump prices will continue to rise in the coming fortnight. In fact since bottoming out just over a month ago the terminal gate price has surged by almost 9 cents a litre.
• CommSec expects pump prices to increase by a further 3 cents a litre in the next fortnight, taking the national average price to around $1.45 a litre. Already signboards around Australia are showing prices above $1.50 a litremeaning that motorists are more likely to actively lookout for the discount days to purchase fuel.

What do the figures show?

Credit & debit card activity:

• Figures released from the Reserve Bank show that the average credit card balance, fell by $100.90 to $3,214.0 in January. The average credit card balance is only up 0.8 per cent on a year earlier – the slowest annual growth in 16 months.
• Of credit cards attracting interest charges, the average outstanding balance rose by $18.40 to $2,408.50. The average balance accruing interest is up 3.1 per cent on a year ago (slowest growth in 11 months).
• The number of credit card cash advances fell by 3.1 per cent in January. Credit card advances are now down 1.6 per cent on a year ago. Cash advances have been largely falling in annual terms for four years.
• The average credit card limit grew at a 1.7 per cent annual pace, below the rate of inflation and the slowest growth rate in records going back 16 years.
• The number of purchases made on credit cards grew by 8.7 per cent in January compared with a year ago.
• Total debit card transactions rose by 25.8 per cent on a year ago – marking the highest reading on record.

Petrol prices:

• Today, the national average wholesale (terminal gate) stands at a near 29-month high of 134.8 cents a litre, up 2.2 cents a litre over the past week.
• Last week, the key Singapore unleaded petrol price fell by US$2.78 (2.3 per cent) to US$120.82 a barrel. And in Australian dollar terms the Singapore gasoline price fell by $1.42 (1.2 per cent) over the week to $120.46 a barrel.

What is the importance of the economic data?

• The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum. National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions.

What are the implications for interest rates and investors?

• The lift in the price of petrol is further bad news for motorists, taking precious spending dollars out of consumer pockets. Retailers already have to contend with the effects of the weather on seasonal spending, consumer conservatism and higher utility prices.

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• The Commonwealth Bank Business Sales Indicator (BSI) eased yet again in trend terms in January, but it certainly wasn’t all bad news. In fact only a small minority of business sectors are now posting weaker sales. In January only three of the 20 industry sectors recording weaker sales in the month, down from four sectors in December and nine sectors in November.
• In seasonally adjusted terms the BSI rose for the second straight month, lifting 0.5 per cent.
• Across the sectors, Retail stores recorded the largest gain with a 1.3 per cent increase in trend terms – marking the biggest monthly increase in 17 months.
• 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 Commonwealth Bank Business Sales Indicator (BSI) fell by 0.2 per cent in trend terms in January after similar declines in November and December. At face value that suggests continued tough times for retailers, but further examination reveals a more promising picture.
• In fact the majority of industry sectors continue to record spending growth. In January only three of the 20 industry sectors recording weaker sales in the month, down from four sectors in December and nine sectors in November.
• While ordinarily the trend measure is preferred for data analysis as it is less volatile and shows broader trends, seasonally adjusted estimates can highlight key turning points in the data. And another source of encouragement is that we have seen overall growth in sales in seasonally adjusted terms.
• In seasonally adjusted terms the BSI rose for the second straight month, lifting 0.5 per cent. And the biggest industry category – retail stores recorded the largest gain across sectors –marking the biggest increase in 17 months.
• The latest figures do appear to show that we are on the road to recovery, however with high fuel prices and the prospect of a rise in both interest rates and the price of food, consumers will remain fairly guarded.
• 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. This allows analysis of the broader underlying trends that may be hidden in the raw data.

What do the figures show?

• The Commonwealth Bank Business Sales Indicator (BSI) fell by 0.2 per cent in trend terms in January after similar declines in November and December. This was the 13th straight monthly decline for the trend measure of economy-wide spending.
• In January the BSI rose by 0.5 per cent in seasonally adjusted terms after a similar gain in December. There have only been three positive readings in the past 11 months so the recent gains are encouraging for retailers.
• Another source of encouragement is the fact that the majority of industry sectors recorded spending growth in trend terms. In trend terms, the value of spending transactions fell in only three of the 20 industries in January, down from eight sectors in November.
• The biggest industry category – Retail stores – recorded the largest gain across sectors. The 1.3 per cent increase in trend sales in January was the fourth straight gain and biggest increase in 17 months. Next strongest was Contracted services (up 1.2 per cent) followed by Repair services and Service providers (both up 1.1 per cent).
• The Contracted services category includes a range of building trades like electrical services, carpenters and landscape services. Service providers include financial and insurance services.
• The Amusement & entertainment sector recorded growth of 0.5 per cent in January, the best reading in 15 months. The sector includes motion picture theatres, bowling alleys, golf courses and video stores.
• Other sectors to record encouraging gains were Automobile/vehicle rentals (up 0.5 per cent – the best gain in 19 months), Clothing stores (up 0.2 per cent – the best gain in 20 months) and Mail order/telephone order providers (up 0.6 per cent – best gain in 25 months).
• The weakest sectors in January in trend terms were Miscellaneous stores (down 1.2 per cent), Hotels and motels (down 0.4 per cent) Government services (down 0.1 per cent).
• In annual terms, eight of the 20 industry sectors contracted in January. The weakest sectors were Automobile & vehicles and Mail Order and Telephone Order Providers (both down 12.5 per cent) followed by Miscellaneous stores (down 11.9 per cent) and Retail stores (down 3.3 per cent).
• At the other end of the scale, Professional services & membership organisations recorded annual trend growth of 7.7 per cent followed by Contracted services (up 6.2 per cent) and Personal service providers (up 5.3 per cent). Personal service providers include laundries, hairdressers, shoe repair and tax agents.
• Only two of the eight states and territories recorded lower trend sales in January, down from four states in December. Sales were down by 0.1 per cent in both Queensland and Victoria. There was no noticeable impact of either the floods or Cyclone Yasi in the BSI state results. Spending rose most in NSW (up 0.6 per cent), followed by Tasmania (up 0.5 per cent) and Western Australia (up 0.3 per cent)
• In annual terms, the only two states/territories to record growth in January was NSW (up 1.1 per cent) followed by Western Australia (up 0.9 per cent). At the other end of the scale, the spending gauge was weakest in Victoria (down 9.1 per cent) followed by South Australia (down 8.6 per cent) and Queensland (down 5.9 per cent).

What is the importance of the economic data?

• The Commonwealth Bank Business Sales Indicator is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia. Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
• The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

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• Lending to build new homes recorded a healthy increase in December. Loans for the construction of dwellings rose by 1.0 per cent in December – the fourth consecutive increase.
• Overall, the value of housing loans rose by 2.5 per cent in December with the number of loans to owner occupiers up 2.1 per cent. But the number of home loans is 2.8 per cent lower than a year ago.
• Fixed rate loans accounted for 8.9 per cent of all loans in December – the highest reading in 30 months and up from the recent lows of 3.4 per cent in August.
• Credit card balances are growing at the slowest annual pace in 13 months. The average credit card balance in December was up just 1.9 per cent on a year ago. The average balance recorded the usual seasonal lift in the month, up $34.10 to $3,314.90.
• Petrol prices are tracking sideways. According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol remained unchanged at 26 month highs of 135.2 cents a litre in the week to February 13.

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• Record lift in credit card use. The number of purchases and cash out transactions made on credit cards lifted by 13 per cent in November – the biggest increase for a November month.
• Credit card balances are growing at the slowest annual pace in a year. The average credit card balance in November was up just 2.6 per cent on a year ago. The average balance recorded the usual seasonal lift in the month, up $35.90 to $3,280.70.
• Credit card cash advances rose sharply. While it appears an aberration, the number of credit card cash advances lifted 9.6 per cent in November. If the result isn’t reversed next month this may indicate that the recent rate hike has put consumer finances under stress.
• A surprise improvement in tourism numbers. Tourism arrivals have risen for eight months in trend terms while departures are now falling. Given the high level of the dollar, the results are encouraging.

What does it all mean?

• Consumers appeared to take out their credit cards and spend with gusto in November. Credit card use usually does start to lift each November, peaks in December and then falls sharply in January. But the lift in credit card use this November was the biggest ever recorded. That may be a worry for retailers. Because if credit card use soared and retail trade only managed to rise 0.3 per cent in the month, then the December sales figures may prove even softer. Consumers were no doubt enticed to spend by massive discounts on offer by retailers.
• The average credit card balance is barely growing at present with consumers much preferring to live within their own means. The average balance is up just 2.6 per cent on a year ago, the slowest annual pace in a year. And once inflation is taken into account, the average credit card balance hasn’t budget over the past year.
• There were some odd movements in consumer cash and credit transactions in November. Purchases made on both credit and debit cards spiked higher while there was also a sharp surge in one of the most expensive forms of finance – taking cash advances on credit cards. We can’t read too much into one month’s numbers as previous large spikes have generally been quickly reversed the next month. But it is worth watching just to ensure that the November rate hike hasn’t created stress on household balance sheets.
• The good news is that tourism arrivals are showing modest signs of recovery despite the high value of the currency. In fact tourist arrivals have been consistently rising in trend terms for eight months while departures actually turned negative in the latest month.
• The Federal Government simply needs to be doing more to lift migrant numbers and thus prevent skill shortages in the economy. In November, net migrant numbers stood at just over 5,000 people – the second lowest result recorded over the past decade. After the floodwaters recede in Queensland, a substantial rebuilding operation will be needed, thus putting pressure on the job market. To meet the demand for workers, the government will clearly need to look overseas or risk forcing wages and prices up.

What do the figures show?

Overseas arrivals/departures

• Net permanent and long-term arrivals to Australia fell to 206,900 people in the year to November, down 33.8 per cent or 105,530 people on a year ago. Departures from Australia rose by 43,320 while arrivals plunged by 62,210.
• The net number of permanent settlers entering Australia (arrivals less departures) stood at 5,020 in November – the lowest monthly total in 11 months and second lowest result in a decade.
• Tourist departures rose by 0.7 per cent in November to 602,100 after falling by 1.3 per cent in October. It was only the second rise in departures in five months.
• Tourist arrivals rose by 1.1 per cent in seasonally adjusted terms in November to 504,800 after falling by 2.1 per cent in October. It was the third rise in arrivals in four months.
• In seasonally adjusted terms the tourism deficit – the gap between departures and arrivals – stood at 97,300 in November, down 1,200 in the month and below the record (34-year history) deficit of 125,900 in June.
• In trend terms, tourism arrivals have risen for the past seven months. Tourism departures fell 0.1 per cent in trend terms in November – the first fall in 18 months.

Credit & debit card activity:

• Figures released from the Reserve Bank show that the average credit card balance recorded its usual seasonal increase in November, lifting by $35.90 to $3,280.70. But the average credit card balance is only up 2.6 per cent on a year earlier – the slowest annual growth in a year. Over the past five months, the average credit card balance has fallen by $3.10.
• Of credit cards attracting interest charges, the average outstanding balance again recorded the usual seasonal increase in November, up by $45.70 to $2,395.50. The average balance accruing interest is up 4.3 per cent on a year ago (slowest growth in nine months).
• The number of credit card cash advances surprisingly rose by 9.6 per cent in November but was still down 1.8 per cent on a year earlier. Credit card advances have been largely falling in annual terms for four years.
• The number of purchases made on credit cards soared by 13.1 per cent in November after falling 2.9 per cent in October. It was the biggest increase in credit card purchases for a November month.
• The number of purchases made on debit cards rose by 1.6 per cent in October to stand 20.1 per cent higher than a year ago – the fastest annual growth rate in almost eight years.
• The number of just EFTPOS transactions (excludes cash out) rose by 1.4 per cent in November to stand 23.7 per cent higher than a year ago – the fastest annual growth rate on record.
• Cash withdrawn from ATMs in November rose in annual terms in November for the first time in 20 months. The number of cash withdrawals was up 0.7 per cent on a year ago while the value of withdrawals was up by 0.9 per cent.

What is the importance of the economic data?

• The Australian Bureau of Statistics releases data on overseas arrivals and departures is produced monthly and is an indicator of the health of the tourism sector.
• The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
  What are the implications for interest rates and investors?
• The spike in credit card purchases and cash advances is probably an aberration, but it’s worth watching to ensure that consumer finances aren’t being stressed by higher interest rates.
• The continued easing in migrant numbers must be addressed by the Government or it will risk a lift in inflationary pressures. But the increase in short-term tourism arrivals is certainly encouraging when you consider the heady levels of the Aussie dollar.

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• A recovery in spending across the Australian economy remains elusive according to a key gauge.The Commonwealth Bank Business Sales Indicator (BSI) was unchanged in October after weakening for 10
  straight months. The September survey had suggested that spending was turning higher, but unfortunately for retailers there was no validation in the latest results.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities.
• The Commonwealth Bank BSI remains well down on a year ago. The Commonwealth Bank BSI fell by 3.9 per cent in trend terms over the past year, the biggest annual decline since data was first collected six years ago.

What does it all mean?

• It’s very clear that recovery in spending across the Australian economy remains elusive. After contracting for ten consecutive months, spending across Australia remained slow in October, according to the latest Commonwealth Bank Business Sales Indicator (BSI) released today.
• The BSI has under-performed against the Australian Bureau of Statistics narrower retail trade series, especially over the past six months and has contracted by 3.9 per cent in trend terms over the past year. Given that the BSI is far broader in coverage then ABS retail trade, incorporating business and government spending, the results highlight the weakness of spending across the economy.

What do the figures show?

• The Commonwealth Bank Business Sales Indicator (BSI) was unchanged in trend terms in October. At face value this appears encouraging, given that the BSI had previously fallen for ten straight months. However the September survey had suggested that spending had started to grow again. Unfortunately the latest trend estimates have revised away the previous strength, and are now suggesting a flattening of spending across the economy.
• 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 to theraw data. The adjusted figures reveal the broader underlying trends that may be hidden in the raw data.
• Unfortunately the encouraging signs that were apparent in the September BSI weren’t validated in the latest estimates for October.
• The BSI is still well down on a year ago. The BSI has contracted by 3.9 per cent in trend terms over the past year, the weakest result in the six-year history of the spending gauge. The BSI has under-performed against the Australian Bureau of Statistics narrower retail trade series, especially over the past six months. Given that the BSI is far broader in coverage than ABS retail trade, incorporating business and government spending, the results highlight the weakness of spending across the economy.
• In trend terms, the value of spending transactions fell in only five of the 20 industries in October; an improvement on September when six sectors went backwards. The strongest sector was Business services (up 1.1 per cent), followed by Contracted services and Personal service providers (both up 1.0 per cent).
• The weakest sector by a fair margin in October in trend terms was Mail order & telephone order providers (down 2.0 per cent) while Miscellaneous stores was down by 0.8 per cent. And while Automobiles & vehicles recorded no change in spending in October, spending had fallen for the previous nine months.
• In annual terms, 11 of the 20 sectors reported growth in October. Leading the way was Personal service providers (up 8.1 per cent) followed by Utilities (up 6.5 per cent), and Hotels and motels (up 4.6 per cent). At the other end of the scale, spending at Mail Order and Telephone Order Providers was down 18.1 per cent on a year earlier followed by Automobile & vehicles (down by 14.5 per cent) and Miscellaneous stores (down 12.2 per cent).
• Only three of the eight states and territories recorded negative monthly trend growth in October: Queensland (down 1.0 per cent), Victoria (down 0.9 per cent), and South Australia (down 0.8 per cent). Spending rose most in Northern Territory (up 1.1 per cent), followed by Western Australia and Tasmania (both up 0.5 per cent), NSW (up 0.4 per cent) and ACT (up 0.1 per cent).
• In annual terms, spending growth was strongest in Northern Territory (up 3.8 per cent) and Western Australia (up 1.4 per cent). At the other end of the scale, the spending gauge was weakest in Victoria (down 7.7 per cent) followed by Queensland (down 6.7 per cent), South Australia (down 5.9 per cent), Tasmania (down 3.8 per cent), NSW (down 3.6 per cent) and ACT (down 0.9 per cent).

What is the importance of the economic data?

• The Commonwealth Bank Business Sales Indicator is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia. Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
• The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

What are the implications for interest rates and investors?

• Whilst overall spending remains fragile, there are still shining lights in the economy. We are seeing certain sectors and states continuing their positive growth trajectory and there has also been a rebound in spending in certain states such as NSW and in sectors such as business services
• Consumers remain very selective and continue to shop for the bargains, so retailers will continue to face downward pressure on margins.

The post Spending remains sluggish across Australia appeared first on AdviserVoice.

• Tentative signs of a recovery in consumer spending. A key gauge of economy-wide spending posted its strongest result in nine months in August. The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.1 per cent in the month, the first positive reading since November last year.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities.

Click here to download this article (pdf)

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• Business confidence is up; conditions are down. According to the NAB business survey, the business confidence index rose from +2.4 in July to +11.2 in August. The business conditions index fell from +5.3 in July to +4.5 in August – the fourth decline in five months.
• Retail discounting returns. The NAB survey suggested that discounting had returned with retail prices up just 0.1 per cent in August.
• ABARE has lifted its crop forecasts. ABARE has lifted its forecast for the wheat crop by 13.4 per cent. The wheat crop is now seen up 15.9 per cent on a year ago. The cotton crop is expected to be up 69 per cent. The overall winter crop is expected to be the third largest on record.
• Yesterday we reported the latest credit & debit card data. We revisit the issue by focussing on the changing use of cash in the community. Fewer dollars are being credited to accounts and fewer dollars are being withdrawn from ATMs while EFTPOS transactions are rising. All this suggests that cash payments are alive and well across the economy. The increased preference for cash also raises fresh questions on the size of the ‘black economy’ in Australia.

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• The Australian Institute of Petroleum reports that the average Australian petrol price fell by 2.2 cents last week. Over the past fortnight prices have fallen by 4.9 cents a litre – the biggest fortnightly fall in 21 months. The national pump price is now holding at a near 11-month low of 119.3 cents a litre.
• Total lending (business, housing, personal and lease loans) rose by 5.2 per cent in July all but reversing the previous months loss. Lending continues to track sideways.
• Loans for construction of dwellings (owner-occupier and investor) fell by $31.8 million to $1.69 billion in July – a 17-month low.
• The average credit card balance stood at a $3,267.70 in July, down $15.30 on June. The average credit card balance is up 5.1 per cent on a year earlier – the fastest annual growth in 29 months.

Click here to download the document (pdf)

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• One of the most poorly understood concepts in Australia is housing affordability. However to be fair, the main reason that it has been so poorly analysed and understood over time is because data has been either incomplete or inconsistent.
• For instance, in the past, data on property transactions tended to focus on capital cities – and for the simple reason that the data was more readily available. The problem is that 40 per cent of homes are outside capital cities. And, as you would expect, the price trends can differ markedly. Actually over the past year capital city house prices have risen by 9.7 per cent whereas regional house prices have risen by just 4.7 per cent.
• Then there has been the problem of comparing the property transaction data. If there was a big increase in sales of four-bedroom homes in one month, clearly that would skew price comparisons unless an adjustment occurred for the composition of sales.
• Fortunately the problem of incomplete or inconsistent home price data has been addressed. RP Data has collected figures on every property transaction in Australia. And, in conjunction with Rismark International, RP Data have adjusted price comparisons to account for compositional problems with their Hedonic Home Value index. This price index is now the primary home price index tracked by the Reserve Bank.
• And when you have data on every single property transaction and then compare that with disposable income across Australia, clearly you have an accurate measure of affordability.
• So how has housing affordability actually been faring? For Australia as a whole, home prices have broadly tracked incomes for the past four years. In other words, home affordability has been broadly stable.
• That doesn’t mean that affordable has been stable everywhere – it almost certainly hasn’t been. For instance Melbourne home prices have risen 16 per cent over the past year with Darwin prices up 15.6 per cent but Brisbane prices have lifted just 4.2 per cent. But what will tend to happen is that buyers will adjust their behaviour. Simply if a property becomes unaffordable in one area, then buyers will dry up, turn their attention elsewhere and prices will need to adjust.
• So the next time you read that housing affordability is continuing to worsen, or perhaps has hit the worst levels on record, ignore the report and move on.

The week ahead

• Generally economic data releases tend to get grouped together and thus follow a theme. Measures of inflation are released around the same time each quarter while labour market indicators tend to be released early in the month. But in the coming week there is no theme with a motley collection of statistics due for release.
• On Monday new figures on lending are released including Reserve Bank data on credit card lending. On Tuesday the NAB business survey is issued alongside the quarterly Crop Report from ABARE. On Wednesday consumer sentiment, car sales and dwelling starts will be released. And on Thursday Reserve Bank Assistant Governor Philip Lowe delivers a speech and the Reserve Bank quarterly Bulletin and imports data are issued.
• Consumers are super-conservative at present and that should be reflected in the latest credit card statistics as well as personal finance data. Still, despite their conservatism, consumers are happy enough. And that should be reflected in the consumer sentiment figures to be released on Wednesday. This will be the first survey undertaken after the election result was finalised.
• Generally business and consumer confidence move together. But the last reading showed a rise in consumer confidence and a fall in business confidence to 14-month lows. The August reading for business confidence should show a modest improvement despite the on-going fluky business conditions.
• Adding to the mix of patchy economic results will be figures on dwelling starts and car sales. We expect that car sales fell for the seventh time in eight months, down 1.5 per cent in August. While the car market is reasonably healthy, the hangover effects of last year’s Government stimulus is still being felt. And dwelling starts were probably flat in the June quarter. Given the sharp fall in approvals, the likelihood is that starts have now peaked and will ease over the next six months.
• In the US, investors will need to dissect a bevy of top shelf indicators. On Tuesday retail sales data is released with industrial production on Wednesday, producer prices and the current account on Thursday and consumer prices and consumer confidence on Friday.
• The main attention will be focussed on retail sales and production. Economists believe that retail sales rose by around 0.3 per cent in August after a 0.4 per cent lift in July. And excluding car sales, again retail sales are expected to have gained 0.3 per cent. Given the weak position of the job market, the growth in retail spending is certainly good, but you wouldn’t describe it as great.
• Economists also believe that industrial production edged 0.2 per cent higher in August after a solid 1.0 per cent gain in July. When combined with the expected result on retail sales, the data would hardly be indicative of an economy slipping back into recession.
• The other event of importance for investors occurs on Monday with the release of the latest Chinese economic indicators, including retail sales, production, inflation and investment.

Sharemarket

• Investors hoping for political certainty would clearly be disappointed by the election result. Framing of legislation is likely to prove difficult under the so-called “rainbow coalition” of Labor, Greens and three independents. And there are key issues that will have to be navigated over the coming year including the National Broadband Network, mineral resource rent tax, broader tax reform measures and devising a price for carbon.
• However in practical terms it means that analysts and investors will not be able to factor future legislative changes into valuations. The upshot is that current and perspective business conditions, together with company-specific factors and strategies, will continue to shoulder the burden of setting share prices.

Interest rates, currencies & commodities

• Currently there is a major disconnect between financial market views on interest rates and the views of market economists. The overnight indexed swap market is factoring in a 25 basis point rise in the cash rate in a year’s time. And 90-day bank bill futures are similarly assuming that yields will be around 25 basis points higher by the end of 2011. By contrast only one of 22 economists polled by Reuters expects a 25 basis point rate hike by the end of 2011 – all other economists tip bigger rate increases. Three of the economists expect cash to reach 6.00 per cent, with another three tipping 5.75 per cent and the remaining forecasts are between 5.00-5.50 per cent.
• The latest coal and iron ore price negotiations serve are a wake-up call for those investors that assumed that commodity prices would continue to rise or remain at lofty levels almost indefinitely. Platts reported that the BHP Mitsubishi Alliance settled premium hard coking coal contracts with Japanese steelmakers at US$209 a tonne for the December quarter, down 7.1 per cent from US$225/t in September. And Rio Tinto has agreed with Japanese steel makers to reduce its iron ore price for the December quarter by around 13 per cent.
• The current spot iron ore price is around US$142 a tonne. CBAs chief resources analyst Andrew Hines expects contract prices to ease to around US$119 a tonne in 2011, US$107 in 2012 and US$92 in 2013. However he notes that, with not a lot of new iron ore supply hitting the market in the next 12 months, there is an upside risk for prices.

The post Investor Signposts: Week Beginning September 12 2010 appeared first on AdviserVoice.