This indicator suggests higher energy bills continue to hurt spending at Australian retailers

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Spending levels across the Australian economy accelerated in September, driven by larger outlays on government services and utilities.

That’s the finding of the latest Business Sales Index (BSI) from the Commonwealth Bank which increased 0.4% in trend terms following a 0.3% gain in August, leaving total economy-wide spending up 7.3% on the levels of a year earlier.

The BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities, covering spending on both goods and services. The bank says it is comparable to nominal household final consumption expenditure in Australia’s quarterly GDP reports, differentiating it from retail sales which only captures spending at retailers.

Household consumption is the largest part of the Australian economy at a shade under 60%.

Although the BSI only captures spending through Commonwealth Bank merchant facilities, as Australia’s largest retail bank, it’s undoubtedly a good indicator on overall spending levels across the economy.

The bank said that spending growth in September was broad-based in nature, increasing in 15 of 19 industry sectors surveyed.

While from a broader perspective that indicates the economy is doing well, the BSI found spending on government services and utilities drove much of the increase in September.

Spending on government services and utilities increased by 1.3% and 1.1% respectively, offsetting declines of 1.6%, 0.8% and 0.4% on business services, retail and entertainment.

The weakness in the BSI contrasts to the separate Cashless Retail Sales report released by the National Australia Bank which revealed spending at retailers rebounded modestly in September having fallen previously in August.

Retail sales have fallen by 0.2% and 0.6% over the past two months, according to official data from the ABS.

Source: Commsec

“Spending is good without being great,” said Craig James, chief economist at Commsec. “Electricity and gas bills are up, crimping some spending by consumers.”

That suggests that Australians spent less in discretionary areas to pay for higher utility bills in September.

From a longer-term perspective, spending rose in all bar one sector over the year, led by strong gains at service providers, airlines and utilities which increased 19.9%, 15.9% and 12.8% respectively.

The increases in the latter two areas partially reflect higher energy prices now compared to September 2016.

Across the states and territories, spending rose in all locations over the year, led by Queensland where spending levels increased by 9.8%. The ACT and Northern Territory also performed strongly, logging gains of 9.4% apiece.

Looking ahead, James said the key influence on spending levels will come down to the strength of the labour market.

“If employment continues to lift and the jobless rate falls, then employers may need to pay more to hire or secure workers. And, in turn, spending growth will be boosted,” he says.

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