While the Australian economy had a shocker in the September quarter of this year, contracting at the fastest pace seen since the global financial crisis, there’s plenty of evidence emerging to suggest that the same outcome is unlikely to be repeated in the current quarter.
Employment growth was strong in October, even forgiving well documented concerns surrounding the ABS’ seasonally adjusted data, while job ads continue to point to solid employment growth in the months ahead. And retail sales, after a lacklustre first nine months of the year, have also started to accelerate, posting a solid rise of 0.5% in October.
Now economy-wide spending, including on both goods and services, is expanding at the fastest pace seen in over seven years, according to the latest Business Sales Index (BSI) released by the Commonwealth Bank on Tuesday.
The BSI is a monthly indicator on economy-wide spending, capturing the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities over a specific month. It includes spending not only retail sales, but also that on automobiles, personal services and airlines.
While it only captures payments processed through Commonwealth Bank terminals, not those from all financial institutions, as Australia’s largest retail bank, the results can be used to extrapolate broader spending themes evident in the Australian economy.
And the news in November was good. Very good.
The BSI lifted by 1.2% during the month in trend terms, building on the upwardly-revised 1.1% gain of October.
It now stands at the highest level seen since the global financial crisis.
Adding to the strength of that result, the improvement over the past two months now appears to be part of a broader trend rather than an aberration, with Commsec noting that the average monthly gain has accelerated from tepid levels seen earlier in the year.
“Over the first six months of 2016, economy-wide spending grew on average by 0.2% a month in trend terms, down from 0.5% average monthly gains over 2015. But over the past four months spending has grown on average by 0.9% a month,” said Savanth Sebastian, senior economist at Commsec.
As a result of this rebound, Sebastian says that the trend annual growth rate accelerated to 6.2% last month, up from 5.5% in October.
A solid pick-up in economy-wide spending, if there ever was one, and one that was broad based in nature.
Commsec said that sales in 16 of the 19 industry sectors rose in trend terms in November, led by another strong lift in spending on government services.
That ratio improved even further when looking at the trend of the past year with all bar two components — retail stores and transportation — recording a lift in total spending.
According to Commsec, the sectors with strongest annual growth in November included government services (up 23.1%), amusement and entertainment (up 19.3%), wholesale distributors and manufacturers (up 14.3%) and Hotels and Motels (up 13.6%).
Given record levels of short-term visitor arrivals to Australia right now, the increase in entertainment and accommodation spending is not all that surprising.
According to the ABS, total short-term arrivals over the past 12 months rose to 8.145 million in October, up 11.2%, or 819,800, from the levels in year earlier.
And the strength in spending was not just broad based by category, but also evident across the country.
Every state and territory saw spending lift in November.
New South Wales led the pack with an increase of 1.8%, closely followed by the ACT and Northern Territory/ Queensland at 1.4% and 1% apiece. Putting the strength of the monthly performance into perspective, Tasmania, at 0.4%, recorded the weakest growth in spending.
You know that things are looking alright when a monthly increase of 0.4% is deemed “weak”.
That form was also evident in annual spending growth with all states and territories recording an increase from a year earlier.
Strongest growth was in South Australia (9.3%), followed by New South Wales (8.4%), the ACT (8.1%), Western Australia (7.7%), Queensland (6.9 %), Northern Territory (4.9%), Tasmania (3.6%) and Victoria (1.2%).
Certainly a strong result, and one that is particularly pleasing given many of the top spots were filled by those parts of the country that were previously struggling with the unwinding mining capital expenditure boom.
Sebastian certainly thinks so, calling the November BSI report “encouraging”.
“The latest lift in spending is certainly encouraging – particularly given that the strength was broad-based,” he said.
“With confidence levels above long-term trends, there are good reasons to expect that the lift in broader-based spending should continue beyond the all-important Christmas period.”
Given some of the doom and gloom being bandied around about the Australian economy right now, many will be hoping that the trend in not only the BSI but other economic indicators is a sign of things to come.