Retail sales could be on the rise, with the Commonwealth Bank’s Business Sales Indicator increasing by 0.6% in trend terms in January, the fourth straight month every state and territory has recorded higher sales.
CommSec chief economist Craig James says the recovery in economy-wide spending validates the Reserve Bank’s decision not to cut rates.
“Despite ongoing economic concerns being felt both here and overseas, sales figures are ticking up and have been for some time now.”
“The results align with the Reserve Bank’s view that activity in the services sector has generally proved stronger than physical goods sales.”
James was hesitant to say the results are a sign of renewed optimism, but are a relatively weak level of confidence amongst consumers down to a desire to manage debt rather than an inability to spend.
“It’s clear the jobs market is in pretty good place. People are not really deterred by the cost of goods, but the desire to keep debt in order,” he says.
The monthly Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities, which account for around 30% of Australian transactions.
Just four of the 20 industry sectors it covers contracted in January.
Tourism related industries produced poor results, with hotels and motels down 1.3%, while vehicle rental was again broadly flat.
Service providers, utilities and business services were also weak. While spending in the utilities sector fell for the seventh straight month, the rate of decline has eased since November.
Over the past month, spending was strongest in clothing stores, which recorded growth of 2.3%.
“While results are seasonally adjusted, it has been the preparedness of retailers to keep prices low that has helped the sector,” James says.
Mail order and telephone order providers and retail stores were both up 2%.
Notable spending was also recorded in the government services sector, which recorded its highest growth in nine months, up 0.9%.
Seven of the 20 industry sectors contracted in the 12 months to January, with retail the worst performer, down 8.4% on a year earlier.
On the back of the high Australian dollar, hotels and motels were down 4.1%, closely followed by automobiles and vehicles, down 3.7%.
Mail order and telephone order providers were up 22.4%, clocking the strongest annual results.
In a sign consumers are returning to discretionary spending, the entertainment and amusement sector was up 20.0% on last January, and clothing stores were up 13.8%.
Pitting the states and territories against each other, the ACT recorded the strongest sales in trend terms in January, up 1.6%.
It was followed by South Australia which was up 1.0%, Western Australia up 0.9%, Northern Territory up 0.8%, Tasmania up 0.7%, Queensland up 0.6%, Victoria up 0.5%, and NSW trailing, up 0.3%.
The ACT also recorded the strongest annual growth, of 4.8%, while spending in NSW was 6.8% lower than a year ago in trend terms.