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Solid lift in August spendingCommonwealth Bank Business Sales Index
The Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, rose by 0.9 per cent in trend terms in August. While a solid result, and above the long-term average monthly growth of 0.4 per cent, it was the slowest monthly growth in five months.
The annual trend growth in sales rose to fresh 4-year highs of 11.4 per cent in August, up from 10.7 per cent in July and the decade-average pace of 3.4 per cent.
The more volatile seasonally adjusted measure of the BSI rose by 0.6 per cent in August after lifting 2.7 per cent in July.
At a sectoral level, all 19 industry sectors except Clothing Stores rose in trend terms in August, a similar result to July. And sales rose in all of the 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 strong job market has been fundamental in driving economy-wide spending over 2018. It’s not just the fact that jobs are being created, but it is the improving confidence of those who already have jobs.
Other spending drivers include the rising level of infrastructure activity as well as the heathy inflows of foreign tourists. Aussie retailers are also keeping prices in check, giving consumers greater encouragement to open their wallets.
What does the data show?
The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 0.9 per cent in trend terms in August – the 26th consecutive month of spending gains.
The growth pace started lifting in September 2017 and over the period from December 2017 to August 2018 the BSI has consistently grown by between 0.9-1.1 per cent a month.
Annual trend growth for the BSI rose to fresh 4-year highs of 11.4 per cent in August, up from 10.7 per cent in July.
The more volatile seasonally adjusted measure of the BSI rose by 0.6 per cent in August after lifting 2.7 per cent in July.
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 withthe 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 seasonallyadjusted and trend BSI results permit analysis of the broader underlying trends that may be hidden in the raw data.
Across sectors, all 19 industry sectors except Clothing Stores rose in trend terms in August. The biggest lift in sales occurred for Amusement & Entertainment (up 2.1 per cent) followed by Government Services (up 1.7 per cent) and Hotels & Motels (up 1.1 per cent). Sales fell 0.1 per cent at Clothing Stores.
Sales at Automobiles & Vehicles rose by just 0.1 per cent in August and growth was the weakest in 13 months. In addition, five sectors recorded modest growth of 0.2 per cent in August with another three sectors recording trend monthly growth of 0.3-0.4 per cent.
Meanwhile spending at Retail Stores has consolidated over the past five months, rising by between 0.5-0.8 per cent a month over the period after more lofty gains between October 2017-March 2018. While annual growth of sales at Retail Stores is seemingly solid at 15.7 per cent, notably this is from a low base. Annual declines in sales at Retail Stores were recorded from January 2016 to November 2017.
In annual terms in August, all but one of the 19 industry sectors recorded gains. Spending fell by 0.1 per cent over the past year in the Clothing Stores sector.
At the other end of the scale, sectors with strongest annual growth in August included Retail Stores (up 15.7 per cent), Automobiles & Vehicles (up 13.9 per cent) and Hotels & Motels (up 13.2 per cent).
Sales were stronger across all states and territories in August. The strongest growth occurred in Queensland (up 1.4 per cent), followed by South Australia and Western Australia (both up 1.0 per cent), Victoria (up 0.8 per cent); NSW (up 0.7 per cent); ACT (up 0.6 per cent); and Tasmania and Northern Territory (both up 0.2 per cent).
In annual terms all states and territories had sales above a year ago. The strongest growth was in Queensland (up 15.2 per cent); Western Australia (up 12.2 per cent); Victoria (up 12.0 per cent), South Australia (up 11.2 per cent); NSW (up 9.0 per cent), ACT (up 7.6 per cent); Tasmania (up 7.1 per cent); and Northern Territory (up 6.0 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?
If Aussie businesses continue to do well, they will keep on taking on more staff, serving to push down the jobless rate and push up wages. As a result, economy-wide spending should remain healthy.
CommSec continues to expect stable interest rate settings until late 2019. But wage and price trends are being carefully watched.
Published by Craig James, Chief Economist, CommSec