- Spending across Australia grew at the fastest pace in over four years in January
- Sales at retail stores grew at levels not seen in eight years
- Commsec describes the result as “encouraging” but says it’s too early to call a sustainable upswing
Spending on goods and services processed through Commonwealth Bank (CBA) terminals grew at the fastest pace in four years in January, adding to optimism that stronger labour market conditions may be encouraging families to loosen the purse strings a little.
And spending in retail stores recorded the largest boost in more than eight years, an encouraging sign that the rebound in retail sales seen in the December quarter may have extended into the early parts of 2018.
The CBA’s Bank Business Sales Indicator (BSI) increased by 1.1% in trend terms last month, continuing the rebound in spending that began in the final parts of last year.
The monthly acceleration — the largest increase in four years — saw annual growth lift from 4.9% to 6.2%, above the 3.2% average seen over the past decade.
The BSI tracks the value of credit and debit card transactions processed through the Commonwealth Bank merchant facilities over a specific month, and includes not only spending on retail goods but also 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 across the Australian economy.
Adding to the strong headline figure, Commsec — the bank’s retail broking arm — said spending increased in 18 of the 19 categories monitored.
“The biggest lift in sales occurred at retail stores, up 1.7%,” said Craig James, chief economist at Commsec.
“The lift in spending by retail stores was the biggest in over eight years and has been influenced by a strong job market and lower selling prices.
“The lift in the ‘traditional retail’ segment is encouraging. But sales growth is still short of growth for the broader economy, including government and business sectors.”
Strong increases were also recorded for government services (1.6%), transportation (1.5%) and amusement and entertainment at 1.3% during the month.
Mirroring that outcome, sales also rose in every Australian state and territory, led by Victoria and New South Wales, Australia’s most populous states.
Spending in those locations rose by 1.4% and 1.1% respectively, outpacing gains of 1% in Western Australia, Tasmania and Queensland.
Sales also increased by 0.8% in South Australia, and by 0.2% apiece in the ACT and Northern Territory.
“If sales were up in just a few industry sectors or a few states then there would be doubts about the latest results,” says James.
“But all but one industry reported stronger sales in January. And all states and territories reported gains in spending in the month.”
James said the January report delivered an encouraging result. However, he says that caution is still warranted.
“We would need to see a number of months of stronger outcomes, including the retail data from the Bureau of Statistics, before we can conclude that we have entered a more buoyant spending environment,” he says.
Australia’s January retail sales report will be released on Tuesday, March 6.