This indicator says spending at Australian retailers is soaring

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  • Electronic spending on goods and services grew at the fastest pace in four years.
  • Excluding clothing stores, spending at retailers grew by the fastest pace since mid-2009.
  • Sales grew across most categories and locations in February.

Spending levels across Australia are growing at the fastest pace in years, according to new data released by the Commonwealth Bank (CBA) today.

And it was led by spending growth at retailers, offering some hope that recent weakness in sales may reverse in the months ahead.

The bank’s Business Sales Indicator (BSI), measuring electronic spending through CBA terminals, increased by 1% in trend terms during February, matching a four-year high set in January.

It was the 13th consecutive monthly increase, reflecting not only higher rates of electronic payments in comparison to cash but also strong employment growth over the same period.

Source: Commonwealth Bank

With sales growing strongly over the past two months, it left the value of transactions up 7% from a year earlier in trend terms, the fastest increase in more than two years.

The BSI tracks the value of credit and debit card transactions processed through the Commonwealth Bank merchant facilities over a specific month, and includes spending on retail goods as well as services. It does not include cash transactions.

As such, the CBA says it’s comparable to nominal household consumption expenditure in Australia’s quarterly GDP reports. Household consumption is the largest part of the Australian economy at just under 60%.

While the BSI only tracks spending processed through CBA terminals, as Australia’s largest retail bank, it is likely reflective of broader spending patterns seen at other financial institutions.

Like the headline growth figure, the internals of the report were also strong with 16 of the 19 industry sectors seeing an increase in spending in February in trend terms, up from 15 sectors in January.

And it was led, somewhat surprisingly, by sales growth at retailers, according to Craig James, chief economist at Commsec, the CBA’s retail broking arm.

Source: Commonwealth Bank

“Encouragingly, sales at combined retail and clothing stores continued to lift, growing by 0.9% in February,” he said, noting that just a year ago sales were falling across the sector.

“A firmer job market and competitive pricing by retailers appear to be underpinning spending.”

Excluding clothing stores, spending at other retail outlets grew even faster, lifting by 1.9% in trend terms, the fastest growth since July 2009.

That was a period when spending was booming on the back of the government’s decision to supply households with money to help buffer the economy from the worst of the effects of the global financial crisis.

The data from the CBA paints a very different picture to official retail sales data released by the ABS over the past few months.

Outside of retail, spending on government services and airlines both increased by more than 1% over the month, overriding weakness in spending on utilities, business services and at mail order providers.

By location, the CBA said spending increased in all six Australian states, offsetting declines in both of the territories.

The largest increases occurred in Victoria, Queensland and New South Wales which all registered growth of 1% or more.

Sales in the territories was the only weak spot, falling 0.4% and 0.3% in the Northern Territory and ACT.