Commonwealth Bank of Australia : Sluggish Christmas spending shows that consumers are still cautious, according to the latest Commonwealth Bank Business Sales Indicator (BSI)

• Economy-wide spending softened in December, falling by 1.9 per cent in seasonally adjusted terms.
• Despite the monthly decline, the underlying spending trend suggests 2013 is looking more promising.
• Transport sector marked the strongest monthly trend increase. 

24 January 2013: Economy-wide spending softened in December, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

According to the BSI, spending fell by 1.9 per cent in seasonally adjusted terms in December, after rising by 2.4 per cent in November, extending the erratic spending pattern witnessed over the past seven months.

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.  

Lex Thornton, General Manager Operations and Sales Strategy, Local Business Banking, Commonwealth Bank, believes the ongoing inconsistencies in business sales performance are reflective of today's conservative consumer.  

"Although the overall economic picture showed signs of improvement in the latter half of 2012, consumers are still proceeding with trepidation. If consumers remain prudent, it is unlikely that we will see any consistent or significant spending trends form in the near future.

"We know that many small businesses across the country were hoping for a buoyant festive season. While we saw a lift in spending in November, unfortunately the BSI showed that sales softened throughout December. For 2013 it is important that businesses make sure they have solid processes and plans in place to navigate future volatility."

While seasonally adjusted spending softened, the less volatile trend estimate of spending rose by 0.3 per cent in December, the third straight gain of that magnitude and the fifth straight monthly increase in economy-wide spending.

Craig James, Chief Economist of the Bank's broking subsidiary CommSec, believes the December results were indicative of a year marked by spending and consumer sentiment volatility.

"We're still facing challenges when it comes to consumer sentiment. Despite the positive economic news in the lead up to the festive season, we did not see a tangible flow-on effect to sales over Christmas. The good news is that while seasonally adjusted spending softened, the underlying pace of sales rose modestly with the BSI recording positive growth for the fifth straight month."

"The past year was marked by erratic spending patterns, and while we saw some modest gains throughout the year there is still uncertainty about the momentum and direction consumer spending will take in the New Year."

Industry analysis - spending strongest amongst Transportation and Government Services

Of the 20 industries tracked in the BSI, spending was strongest in the Transportation (up 1.8 per cent) and Government Services (up 1.4 per cent) in trend terms.

Overall 12 of the industry sectors contracted in December, down from 13 sectors in November. Amongst the weakest sectors in December were Service Providers (down 3.6 per cent), Hotels & Motels (down 1.0 per cent) and Automobile/vehicle rentals (down 0.9 per cent).

In annual terms, just four of the 20 industry sectors contracted in December, a similar result to November. Spending fell in Airlines (nfp), Service Providers (down 5.6 per cent), Hotels & Motels (down 4.3 per cent) and Automobile/Vehicle Rentals (down 1.5 per cent).

At the other end of the scale, spending was notably higher at Amusement & Entertainment (nfp) together with Wholesale Distributors and Manufacturers (up by 18.2 per cent), Retail Stores (up 7.4 per cent), Contracted Services (up by 4.9 per cent) and Automobiles & Vehicles (up 6.2 per cent).

State analysis - Sales rose most in VIC and ACT

Sales rose most in Victoria and ACT (both up 0.5 per cent) followed by NSW (up 0.4 per cent), Queensland (up 0.3 per cent), and Tasmania (up 0.1 per cent). The trend BSI has now risen for 18 straight months in Queensland, for 14 straight months in ACT and for nine straight months in Tasmania.

Only two of the states and territories recorded weaker sales in trend terms in December: Northern Territory and South Australia (both down 0.3 per cent). Sales were flat in Western Australia.

In annual terms, no state or territory had sales below a year ago. Strongest growth was posted in South Australia (up 10.6 per cent), followed by ACT (up 10.5 per cent), Queensland (up 8.1 per cent), Victoria (up 5.0 per cent) and Western Australia (up 4.1 per cent)..

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Kate Dudman
Commonwealth Bank
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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 per cent 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. The Business Sales Indicator is tracked in seasonally adjusted and trend terms. The overall Index is measured in both seasonally adjusted and trend terms while state and industry data are measured using the less volatile "trend" approach. The seasonally adjusted and trend estimates of the BSI results are derived via the SEASABS statistical program from the Australian Bureau of Statistics.
• 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.