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Weakness spreads across business sales as conditions remain subdued

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  • Business Sales Indicator falls by 0.3% in trend terms
  • Retail sector surprises with 0.1% lift; Growth remains solid in Amusement & Entertainment sector
  • Weakness spreads with eight of the 20 industry sectors contracting in July
  • ACT and NT strengthen yet again; NSW and QLD continue to slip

Business sales deteriorated further in July as the lacklustre performance in retail spending spread across the Australian economy, according to the latest Commonwealth Bank Business Sales Indicator (BSI).
The BSI is a key measure of economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, a sample of approximately 30% of the Australian market. The BSI fell by 0.3% in July, following a 0.5% decline in June.
According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest figures further highlighted how low consumer confidence was taking its toll on the Australian economy.
“We are now seeing signs of a broader fallout from continued subdued trading conditions, where a lack of consumer spending is starting to affect a wider set of businesses, not just those in the retail sector,” said Mr Comyn.
“The challenges we have been facing are nothing new, however the longer-term impact is starting to become apparent across the business landscape. Current financial market uncertainty isn’t likely to help the situation so it looks as if this weakness will remain until we see some more positive sentiment in the local economy.”
“Despite the over-arching negative results, this month we actually saw a 0.1% increase in spending in the retail sector which is a definite positive and we’ve also seen pockets of the economy continue to perform including ACT and NT.”
Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that there was little to be cheery about.
“The unfortunate truth is that there are few positive results to emerge from the latest Commonwealth Bank BSI,” said Mr James.
“The deteriorating results are a reflection of a number of months of sluggish consumer activity so these figures come as no real surprise. What is worrying, however, is that the ongoing pessimistic attitude present across Australia looks set to continue and in turn will continue to affect spending decisions.”

Industry analysis – the gap widens
Eight sectors contracted in July, the same number as in June and up from five in May. The weakest sector was Automobiles & Vehicles (down 2.2%), although the result remains affected by the restricted inflow of Japanese cars and parts following the earthquake and tsunami earlier in the year. In annual terms, seven of the 20 industry sectors contracted in July.
As has been seen in previous months, the Amusement & Entertainment sector (includes motion picture theatres, bowling alleys, golf courses and video stores) has continued to strengthen, up 1.9% in trend terms in July and up 18.7% in annual terms. This was followed by Wholesale Distributors & Manufacturers (up 1.2%) and Transportation (up 0.7%).
State / Territory analysis – overall picture strengthens whilst ACT maintains momentum
Five of the states and territories recorded weaker sales in trend terms in July, down from six in June. The weakest result was in NSW (down 1.2%), followed by Queensland and South Australia (down 0.9%). Queensland sales have consistently softened over the past 23 months.
The ACT, which has shown consistent growth over the past 10 months, continued to be the strongest performer in July (up 0.2%) followed by Northern Territory and Victoria (both up 0.1%). Spending growth has also remained positive in the Northern Territory in the past three months.
“The picture remains fairly consistent with what we have seen all year,” said Mr James. “There have been no clear indications of a turnaround in spending and no doubt the recent volatility seen in local and global markets will also be preying on consumers’ minds. We therefore expect things to trudge along at this pace for some time to come.”
Tim Mullen
Commonwealth Bank
P: (02) 9118 1667 / M: 0424 141 483
E: [email protected]
 
About the Commonwealth Bank Business Sales Indicator

  • The Commonwealth Bank Business Sales Indicator is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia (approximately 30% of the market).
  • The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy (covering 20 industry sectors and all Australian states and territories) and is available to the public on the Bank’s website and to the media on or around the 20th day of each month.
  • Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
  • The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.
  • The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.
  • The Business Sales Indicator includes industry sectors based on the International Merchant Category Code (MCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment. Refer to Table 1 for the MCC listing.

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Oil set for steady gains as economies shake off pandemic blues – Reuters poll

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Oil set for steady gains as economies shake off pandemic blues - Reuters poll 1

By Sumita Layek and Bharat Gautam

(Reuters) – Oil prices will stage a steady recovery this year as vaccines reach more people and speed an economic revival, with further impetus coming from stimulus and output discipline by top crude producers, a Reuters poll showed on Friday.

The survey of 55 participants forecast Brent crude would average $59.07 per barrel in 2021, up from last month’s $54.47 forecast.

Brent has averaged around $58.80 so far this year.

“Travel and leisure activity look set to catch up to buoyant manufacturing activity due to the mix of stimulus, confidence, vaccines, and more targeted pandemic measures,” said Norbert Ruecker of Julius Baer.

“Against these demand dynamics, the supply side is unlikely to catch up on time, leaving the oil market in tightening mode for months to come.”

Of the 41 respondents who participated in both the February and January polls, 32 raised their forecasts.

Most analysts said the Organization of Petroleum Exporting Countries and allies (OPEC+) may ease current output curbs when they meet on March 4, but would still agree to maintain supply discipline.

“With OPEC+ endeavouring to keep global oil production below demand, inventories should continue falling this year and allow prices to rise further,” said UBS analyst Giovanni Staunovo.

Oil demand was seen growing by 5-7 million barrels per day in 2021, as per the poll.

However, experts said any deterioration in the COVID-19 situation and the possible lifting of U.S. sanctions on Iran could hold back oil’s recovery.

The poll forecast U.S. crude to average $55.93 per barrel in 2021 versus January’s $51.42 consensus.

Analysts expect U.S. production to rise moderately this year, although new measures from U.S. President Joe Biden to tame the oil sector could curb output in the long run.

“A structural shift away from fossil fuels” may prevent oil from returning to the highs of previous decades, said Economist Intelligence Unit analyst Cailin Birch.

(Reporting by Sumita Layek and Bharat Govind Gautam in Bengaluru; Editing by Arpan Varghese, Noah Browning and Barbara Lewis)

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Japan’s jobless rate seen up in January due to COVID-19 emergency measures – Reuters poll

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Japan's jobless rate seen up in January due to COVID-19 emergency measures - Reuters poll 2

TOKYO (Reuters) – Japan’s jobless rate is expected to have edged up in January as service industry businesses suffered renewed restrictions on movement to fight spread of the coronavirus in some areas, including Tokyo, a Reuters poll of economists showed on Friday.

While industrial production activity picked up in Japan, emergency curbs rolled out last month such as asking restaurants to close early and suspending the national travel campaign hurt the jobs market, analysts said.

The nation’s unemployment rate likely rose 3.0% in January, up from 2.9% in December, the poll of 15 economists found.

The jobs-to-applicants ratio, a gauge of the availability of jobs, was seen at 1.06 in January, unchanged from December, but stayed near September’s seven-year low of 1.03, the poll showed.

“As the impact from the coronavirus pandemic prolongs, it is hard for firms, especially the service sector, to expect their business profits to improve,” said Yusuke Shimoda, senior economist at Japan Research Institute.

“So, their willingness to hire employees appear to be subdued and it is difficult to see the jobs market recovering soon.”

Some analysts also said the government’s steps to support employment and existing labour shortages will likely prevent the jobless rate from worsening sharply.

The government will announce the labour market data at 8:30 a.m. Japan time on Tuesday (2330 GMT Monday).

Analysts expect the economy to contract in the current quarter due to the emergency measures to counter the spread of the disease.

(Reporting by Kaori Kaneko; Editing by Simon Cameron-Moore)

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China’s economy could grow 8-9% this year from low base in 2020 – central bank adviser

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China's economy could grow 8-9% this year from low base in 2020 - central bank adviser 3

BEIJING (Reuters) – China’s gross domestic product (GDP) could expand 8-9% in 2021 as it continues to rebound from the COVID-19 pandemic, Liu Shijin, a policy adviser to the People’s Bank of China, said on Friday.

This speed of recovery would not mean China has returned to a “high-growth” period, said Liu, as it would be from a low base in 2020, when China’s economy grew 2.3%.

Analysts from HSBC this week forecast that China would grow 8.5% this year, leading the global economic recovery from the pandemic.

If 2020 and 2021’s average GDP growth is around 5%, this would be a “not bad” outcome, said Liu, speaking at an online conference.

China is set to release a government work report on March 5 which typically includes a GDP growth target for the year.

Last year’s report did not include one due to uncertainties caused by the coronavirus. Reuters previously reported that 2021’s report will also not set a target.

(Reporting by Gabriel Crossley and Muyu Xu; Editing by Sam Holmes and Ana Nicolaci da Costa)

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