Economy-wide spending lifted again in February according to the Commonwealth Bank Business Sales Indicator (BSI). In trend terms the BSI rose by 0.4 per cent in February, the sixth straight increase in spending, although softer than the 0.7 per cent gains recorded in each of the previous three months.

The more volatile seasonally adjusted estimate of spending posted a modest 0.2 per cent rise in February, although encouragingly this followed a solid 2.0 per cent lift in spending in January. Annual growth stands at 4.7 per cent.

The seasonally adjusted and trend estimates of the BSI results are derived via the SEASABS statistical program from the Australian Bureau of Statistics.

At a sectoral level, only five of the 20 industry sectors contracted in trend terms in February, although this was up from the three sectors that recorded declines in January. And none of the eight states and territories recorded weaker sales in trend terms in February – a situation has now prevailed for five 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?

Aussie consumers and businesses are continuing to spend cautiously. According to the latest Commonwealth Bank Business Sales Indicator (BSI), economy-wide spending grew by 0.4 per cent in trend terms in February, the sixth constructive monthly increase in spending but the smallest gain in five months.

The $64 question is whether the latest crisis in Europe derails the recovery in consumer spending. If it is resolved quickly, then spending should continue its recovery, especially given the improvement in the job market.

Retailers have reason to be more confident, but it is still a case of keeping prices low to attract customers and prevent them flocking to overseas web sites.





What do the figures show?

According to the latest Commonwealth Bank Business Sales Indicator (BSI), economy-wide spending grew by 0.4 per cent in trend terms in February, the sixth constructive monthly increase in spending but the smallest gain in five months.

Traditionally the seasonally-adjusted BSI measure is more volatile, but it posted a gain of 0.2 per cent in February, extending the 2.0 per cent lift in spending recorded in January. Annual growth in spending now stands at 4.7 per cent in seasonally adjusted terms and 4.8 per cent in trend terms.

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. The seasonally adjusted and trend BSI results are derived from the same SEASABS statistical software. This allows analysis of the broader underlying trends that may be hidden in the raw data.

Across sectors, five of the industry sectors fell in trend terms in February, up from three sectors in January but level with the December result when five sectors recorded declines. The strongest monthly trend increase in sales occurred in Amusement & Entertainment (up 2.1 per cent), followed by Service Providers (up 1.3 per cent) and Transportation (up 1.0 per cent).

Amongst the weakest sectors in February were Mail Orders & Telephone Order Providers (down 3.8 per cent), Business Services (down 0.4 per cent) and Contracted Services (down 0.1 per cent).

In annual terms, just three of the 20 industry sectors contracted in February, a similar result to both December and January. Spending fell in Airlines (nfp), Mail Orders & Telephone Order Providers (down 15.2 per cent) and Hotels & Motels (down 1.6 per cent).

At the other end of the scale, spending was notably higher at Amusement & Entertainment (nfp) together with Wholesale Distributors and Manufacturers (up by 17.5 per cent), Retail Stores (up 8.2 per cent), Automobiles & Vehicles (up by 6.2 per cent) and Service Providers (largely financial firms), (up 6.4 per cent).

None of the states and territories recorded weaker sales in trend terms in February. Sales rose most in the ACT (up 0.9 per cent), followed by South Australia (up 0.7 per cent), NSW, Queensland, Tasmania and Western Australia (each up 0.5 per cent), Northern Territory (up 0.4 per cent) and Victoria (up 0.1 per cent).

The trend BSI has now risen for 21 straight months in Northern Territory, for 20 straight months in Queensland, for 19 months in South Australia, for 17 straight months in ACT and for 11 straight months in Tasmania.

In annual terms, no state or territory had sales below a year ago. Strongest growth was posted in ACT (up 12.2 per cent), followed by South Australia (up 10.6 per cent), followed by Queensland (up 7.7 per cent), Tasmania (up 6.7 per cent) and Western Australia (up 6.1 per cent).

What are the implications for interest rates and investors?

The BSI is the latest in a line of indicators that will keep the Reserve Bank on the interest rate sidelines.

Consumer spending is expanding at a reasonably constant rate across the country. The exception is Victoria, feeling the effects of a soft manufacturing sector and flat home prices.

Amusement & entertainment is the key sector at present but business-to-business spending remains soft as firms focus on cost cutting.