It seems that the government’s budget measures and a lift in business conditions as flagged in the NAB’s business survey are combining to drive business spending at the moment.
That’s manifested in the release this morning of the Commonwealth Bank’s Business Sales Indicator (BSI) which showed that “spending at Business Services enterprises rose by 5.3 percent in September – the biggest gain since January 2008.”
The business services sector includes, “businesses such as Office Furniture, Commercial Equipment, Electrical Parts, Computers and Computer Equipment and Software.”
The bank acknowledges that this spending hasn’t spread economy-wide noting a growth rate of just 0.3% in the full index after 0.5% gains in the previous two months is, “the slowest pace in almost 3 years.”
But the bank added, “while annual growth of spending also eased from 7.1 per cent to 6.8 per cent, this rate still remains well above the decade-average of 5.1 per cent.”
On a sectoral basis besides the strong growth in business services there were also some encouraging results.
The bank said:
Sales also rose at Miscellaneous Stores, up 1.2 per cent, as well as in the Transportation and Contracted Services sectors, up 0.9 per cent and 0.8 per cent respectively. The large retail sector also grew by 0.5 per cent in trends terms, after rising between 0.6-0.7 per cent per month over the previous seven months.
Airlines (-3.6%), Government services (-1.6%) and Utilities (-0.7%) all fell.
CommSec chief economist Craig James said that even though the spending hadn’t spread economy wide the, “stellar rise in business spending shows that the Federal budget initiatives are proving to be sustainable over a longer period.” Scott Morrison, and Joe Hockey would both be pleased by that. “With growth across a number of retail-based sectors, businesses should be feeling optimistic leading into the holiday season,” James said.
We’ll get the latest update of the NAB’s larger quarterly Business Survey on Thursday to gain a deeper insight into what this survey, and others in the economy, are really pointing to.