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Economy-wide spending posts solid gainsCommonwealth Bank Business Sales Index
Economy-wide spending continued to recover in November after a mid-year slowdown. The Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, rose by 0.6 per cent in trend terms in November after a 0.5 per cent increase in October and 0.4 per cent growth in September.
Spending growth is now solidly above the longer-term (13-year) trend pace of 0.5 per cent. The annual trend growth in sales eased from 7.1 per cent to 6.8 per cent but this is still above the long-term trend pace of 6.1 per cent.
The more volatile seasonally adjusted measure of the BSI rose for the fourth straight month in November, lifting by 0.9 per cent after a 0.3 per cent gain in October.
At a sectoral level, 17 of the 19 industry sectors rose in trend terms in November, a similar result to October. And sales rose in all eight states and territories in the month.
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?
The boost in the automobile and vehicle sector follows recent inflation data from the Bureau of Statistics which shows car prices are at 30-year lows. Consumers are really taking advantage of dealership discounting with new motor vehicle sales near record high levels. Utes and SUVs are the most popular choice of vehicles for Aussies.
November was also another strong month for Business Services with the sector seeing its strongest gain in a year. This reflects survey results showing business conditions to be the best in 9 years with investment, sales and profitability all firm.
What does the data show?
The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 0.6 per cent in trend terms in November, after a 0.5 per cent increase in October and 0.4 per cent growth in September.
But as highlighted last month, sales at combined retail and clothing stores remain soft, and were broadly unchanged in November – the weakest result in nine months.
Annual trend growth of the BSI eased from 7.1 per cent in November to 6.8 per cent in October.
The more volatile seasonally-adjusted measure of the BSI rose by 0.9 per cent in November – the fourth straight increase in monthly sales.
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, 17 of the 19 industry sectors rose in trend terms in November. The biggest lift in sales occurred at Automobiles & Vehicles (up 1.9 per cent) from Business Services and Utilities (up 1.3 per cent), Amusement & Entertainment (up 1.1 per cent) and Government Services and Repair Services (up 1.0 per cent).
On the other side of the equation, sales fell in Mail Order/Telephone Order Providers (down 0.4 per cent) and Transportation (down 0.3 per cent). Sales at Retail Stores were broadly unchanged.
The lift in spending by Business Services was the strongest gain in a year and reflects survey results showing business conditions to be the best in 9 years with investment and profitability both firm.
In annual terms in November all of the 19 industry sectors recorded gains, although spending at Mail Order/Telephone Order Providers was only up 0.1 per cent.
At the other end of the scale, sectors with strongest annual growth in November included: Service Providers and Amusement & Entertainment (both up 15.1 per cent) and Airlines (up 14.9 per cent).
Across all states and territories in November, sales were stronger. Strongest growth occurred in Northern Territory (up by 2.5 per cent) followed by South Australia (up 0.9 per cent); Queensland (up 0.8 per cent); Western Australia (up 0.7 per cent); Tasmania and NSW (both up 0.6 per cent); and ACT and Victoria (both up 0.4 per cent).
In annual terms all states and territories had sales above a year ago. Strongest growth was Northern Territory (up 17.9 per cent); Queensland (up 9.6 per cent); South Australia (up 9.2 per cent), Victoria (up 7.6 per cent); ACT (up 7.4 per cent); Tasmania and Western Australia (both up 6.3 per cent); and NSW (up 5.0 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?
Economy-wide spending is growing, but not fast enough to generate inflationary pressures. We expect interest rate stability through until the end of 2018. 
Originally published by Craig James, Chief Economist and Ryan Felsman, Senior Economist. CommSec