CommBank: Australia's business spending growth is at its lowest level in 3 years

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Business spending across Australia continues to lift in annual terms according to the latest release of the Commonwealth Bank’s Business Sales Indicator. But the data also showed that January’s 0.3% rise in trend terms was the slowest monthly growth rate for over three years.

January’s 0.3% trend growth continued recent monthly falls in sales growth after November’s 0.5% print and December’s 0.4% growth. But the more volatile seasonally adjusted number for January showed a rise of 0.6% following December’s 0.9% increase. Annual growth in seasonally adjusted terms showed an increase from 7.4% to a 7.6% rate.

What to make of this data, which is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities in accordance with ABS practices, given the divergent monthly outcomes for trend and seasonally adjusted is a vexed question.

We asked Craig James, CommSec’s chief economist, what he made of the data and in particular the fall in trend growth.

He told Business Insider that the “effects of stimulus measures are dissipating so we are getting back to more ‘normal’ growth.”

That means “annual growth sitting at 7.1% rather than more normal 4.8%,” he said. Going forward he said business spending is likely to track the longer term average of “0.3-0.4%” in the the future.

That’s healthy, if not spectacular growth but in line with decade averages according to the index data.

The sectoral breakdown showed “six of the 19 industry sectors fell in trend terms in January: Airlines, Professional Services Membership Organisations, Clothing, Transportation, Contracted Services and Amusement & Entertainment.”

“Of the sectors recording gains, notable was Government Services (up 3.1 per cent and the 5th consecutive lift in sales). Sales at Business Services rose by 1.5 per cent in January, the 11th straight gain,” James wrote.

Summing it all up James said:

There has been some loss of momentum, but overall spending continues to lift across the nation. Encouragingly the gains in spending appear broad-based with growth occurring across industries as well as states and territories. The business sector has now notched up 11 consecutive months of spending increases. The business investment data on Thursday will shed more light on business spending.

The Reserve Bank won’t be in a rush to change interest rate settings. However it will continue to track a wide variety of indicators to ensure that the economy isn’t losing momentum.

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