Here's yet another worrying sign for Australia's struggling retail sector

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The Commonwealth Bank’s monthly spending index showed sales across Australia continued to climb in October.

But while the data was indicative of the interesting shift underway in consumer trends, there was another poor reading for Australia’s struggling retail sector.

The bank’s Business Sales Indicator (BSI) shows sales rose by 0.6% in trend terms (up from 0.5% in September) which was the strongest growth in five months.

CBA obtains the data by tracking the value of debit and credit card transactions through its payment facilities each month.

It acts as a broad spending indicator, covering not just retail sales but also spending on automobiles, airlines and personal services.

“Spending lifted in October across 16 of 19 industries, but the service sectors were the main winners as Aussie consumers continued to embrace experiences,” Commsec Chief Economist Craig James said.

The October reading was above the long-term average of 0.4%, although on an annual basis growth dipped slightly to 7.3% from 7.5%.

Source: Commonwealth Bank

“The biggest lift in sales occurred at Amusement & Entertainment (up 1.8%), followed by Government Services (up 1.7%), Automobiles and Power Utilities (both up 1.7%) and Hotels & Motels (up 0.9%),” Commonwealth Bank said.

In bad news for late night TV shows, Mail Order/Telephone Order Providers (down 0.6%) were the worst performer, while Commonwealth Bank’s card transaction data showed sluggish growth for the struggling retail sector, which fell by 0.1% — the first decline in eight months.

The weaker activity in retail aligns with last week’s monthly retail sales data from the ABS, which showed sales flat-lined in September.

Those struggles are illustrated in the chart below, which shows broader services activity remains solid while retail is declining — just as Amazon sets up shop in Australia.

Source: Commonwealth Bank

Despite the poor reading, James remains optimistic that the fall in October was representative of a dip before retail spending kicks into gear ahead of the Christmas season.

Looking at the gains in other industries, the steady rise in utilities can likely be attributed to the recent rise in energy prices, which came into effect on July 1.

The October data showed a broad-based pickup across the states and territories, led by gains in NSW, Queensland and the Norther Territory (up by 0.7%) followed by SA and Victoria (both up by 0.6%).

Commonwealth Bank compiles the BSI using trend data to reduce the effect of seasonality and irregularities in debit and credit card transactions.

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