Spending on goods and services in Australia grew at the fastest pace in over a year in March, at least through merchant facilities operated by the Commonwealth Bank.
According to its latest Business Sales Indicator (BSI) — a measure of economy-wide spending — the value of credit and debit card transactions processed through its terminals jumped by 0.6%, the largest increase in 15 months.
It was also substantially above the 0.2% average seen over the prior five months.
The more volatile seasonally-adjusted BSI jumped by 1.6% in March after rising 1.3% in February, leaving the annual pace of growth at a giddying 9.9%.
While the BSI only measures the value of transactions processed through CBA terminals, as Australia’s largest retail bank, the results can be used to extrapolate spending patterns across the broader Australian economy.
Given that consumers are continuing to move towards cashless transactions, that trend could, at the margin, boost the growth in the BSI.
The CBA says that given it includes spending on both goods and services, the BSI is comparable to household consumption expenditure in the ABS’ quarterly GDP report.
And given that it’s the largest component within the Australian economy, the boost reported in March is an encouraging sign for the upcoming Q1 GDP report.
The CBA said that spending rose in 17 of the 19 industry sectors it tracks in March, up from 15 sectors in both January and February.
And, reflective of that broad-based increase, the value of transactions increased in all of Australia’s eight states and territories.
As a result of the strong lift in March, the annual pace of growth accelerated to 3.1% from 2.5% in February, the largest increase in four months.
While an encouraging sign for household spending, Craig James, chief economist at Commsec, said that the late timing of Easter this year may have been a factor behind the strong headline result.
“While the latest improvement in the BSI is encouraging, increased spending ahead of Easter may have played a part in the result,” he said. “A clearer picture of economy-wide spending should emerge over the next couple of months.”
Perhaps adding to the case for caution, the pickup in spending came despite a sharp deterioration in consumer sentiment over the same period.
Looking through the potential volatility, James said that outlook for spending remains mixed.
“Low interest rates and the wealth effect of rising home prices should support spending.,” he says. “But modest wage growth and uncertainty about the Federal Budget will serve as a brake on sales.”