Businesses have continued to reap the benefits of an improvement in consumer spending, according to the latest Commonwealth Bank Business Sales Indicator (BSI) released today.

The BSI, which tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, eased in trend terms in January, however a closer analysis of the data shows that the BSI rose by 0.5 per cent in seasonally adjusted terms after a similar gain in December.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, there have only been three positive readings in the past 11 months so the recent gains are encouraging for retailers.

“These positive signs are pleasing, particularly as they take into account a number of economic setbacks that one would have expected to drive down sales,” said Mr Comyn.

“We’ve seen many small businesses devastated by the recent floods and this was against the backdrop of the already weak levels of consumer confidence. Therefore, to see the biggest industry category of Retail stores recording the largest gain across sectors and its biggest increase in 17 months is definitely good news.”

Whilst the signs were positive, Mr Comyn added that businesses weren’t yet out of the woods and that there were still a number of barriers ahead to a full recovery.

“The simple fact is that consumers will need to keep spending and in larger amounts if we are to see this recovery continue, particularly at smaller outlets where this continued support is so important. With consumers still cautious and many preferring to hang on to their money, it looks to be a slow road ahead.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that by reviewing the data in both trend and seasonally adjusted terms, it was possible to see distinct shifts in consumer spending patterns.

“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,” said Mr James.

“The good news is that we have seen overall growth in sales in seasonally adjusted terms. And turning to the less volatile trend estimates, another source of encouragement is the fact that the majority of industry sectors continue to record spending growth. In trend terms, the value of spending transactions fell in only three of the 20 industries in January, down from eight sectors in November.”

Retail stores powers ahead with contracted services not far behind

In addition to the strong gains posted by Retail stores (up by 1.3 per cent), Contracted services also performed strongly, up 1.2 per cent in trend terms the month and up 6.2 per cent over the year. The Contracted services category includes a range of building trades such as electrical services,
carpenters and landscape services. This sector was followed by Repair services and Service providers, both up 1.1 per cent. Service providers include financial and insurance services.

Other sectors to post positive gains included the Amusement & entertainment sector with 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. Mail order/telephone order providers also recorded its best gain in 25 months, up by 0.6 per cent.

The weakest sectors in January in trend terms were Miscellaneous stores (down 1.2 per cent), Hotels and motels (down 0.4 per cent) and Government services (down 0.1 per cent). Miscellaneous stores was also one of the weakest sectors in annual terms, down 11.9 per cent.

Queensland and Victoria down although flood impact minimal
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 however 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).

“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,” said Mr James.