remained unchanged in trend terms in October, revising away previous strength and suggesting a flattening of spending across the economy.
According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the encouraging signs that were seen last month had not been validated in the latest estimates for October and spending still remained at lower levels throughout the economy.
“At face value, the fact that the BSI remained unchanged in October appears encouraging, especially given that the BSI had previously fallen for ten straight months leading up to August,” said Mr Comyn.
“The overall fundamentals for the Australian economy remain strong leading into the end of the year which is good news for businesses and retailers also have the busy Christmas season to look forward to. However, it is important to recognise that overall growth remains weak and the upward trend we had been witnessing appears to have slowed.”
Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that although spending figures remaining unchanged over the last month, the BSI had also seen its biggest annual decline since data was first collected six years ago.
“It’s very clear that recovery in spending across the Australian economy remains elusive,” said Mr James.
“The BSI has under-performed against the Australian Bureau of Statistics (ABS) narrower retail trade series, especially over the past six months and has contracted by 3.9 per cent in trend terms over the past year. Given that the BSI is far broader in coverage then ABS retail trade, incorporating business and government spending, the results highlight the weakness of spending across the economy.”
Industry analysis – Business services remains strong
In trend terms, the value of spending transactions fell in only five of the 20 industries tracked in the BSI, an improvement on September when six sectors reported negative growth figures.
Business services remained the strongest performing sector in October, up 1.1 per cent, followed by Contracted services (1.0 percent) and Personal service providers (1.0 percent). This latter sector has seen sustained growth from last month’s figures and leads the way on an annual basis with growth of 8.1 per cent.
Mail order and telephone order providers continued its negative growth trend and was the weakest sector by a noticeable margin, down 2.0 per cent. Miscellaneous stores was down by 0.8 per cent and after recording a fall in spending for the previous nine months, automobiles & vehicles recorded no change in October.
State / Territory analysis – spending slows in three of the eight states
Whilst only three of the eight states recorded negative monthly trend growth in October, this was up from two states in September. Queensland was down 1.0 percent, followed by Victoria (down 0.9 per cent) and South Australia (down 0.8 per cent).
Spending rose most in the Northern Territory, up 1.1 per cent, followed by Western Australia which was up 0.5 per cent. These two states were also the strongest performers in annual terms, posting growth of 3.8 per cent and 1.4 per cent respectively.
“Whilst overall spending remains fragile, there are still shining lights in the economy,” said Mr James. “We are seeing certain sectors and states continuing their positive growth trajectory and there has also been a rebound in spending in certain states such as NSW and in sectors such as business services.”