BUSINESS SPENDING GROWTH STRONGEST IN SEVEN YEARS

• Spending at Business Services enterprises rose by 5.3 per cent in September – the biggest gain since January 2008.
• But the lift in business services sales didn’t flow on to economy-wide spending, which grew by 0.3 per cent in trend terms, the slowest pace in almost three years.
• The seasonally adjusted estimate of spending was up 2.8 per cent – the strongest result in more than two years.

Spending by Australian businesses recorded the highest sales growth in more than seven years in September, but growth in economy-wide spending continues to slow, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

The Business Services sector, which includes businesses such as Office Furniture, Commercial Equipment, Electrical Parts, Computers and Computer Equipment and Software, recorded spending growth of 5.3 per cent in trend terms in September – the biggest rise since January 2008.

The lift in business spending continues the recent strong growth for the sector following the government’s budget stimulus, after contracting briefly in August.

However, the growth wasn’t shared more broadly across industries with economy-wide spending up by just 0.3 per cent in trend terms, after growth of 0.5 per cent in both August and July.

But while annual growth of spending also eased from 7.1 per cent to 6.8 per cent, this rate still remains well above the decade-average of 5.1 per cent.

The more volatile seasonally adjusted measure of the BSI posted a solid 2.8 per cent gain in September – the strongest growth since May 2013 - while annual seasonally adjusted growth lifted from 5.7 per cent to a 10-month high of 8.9 per cent.

Craig James, Chief Economist, CommSec, said the strong growth in business spending indicates the Government’s stimulus measures continue to provide a boost to businesses.

“The stellar rise in business spending shows that the Federal budget initiatives are proving to be sustainable over a longer period; however this growth hasn’t helped boost the broader economy. Still, while economy-wide spending growth has slowed, it remains well above the decade average and we’ve also seen strong seasonally adjusted growth.

“With growth across a number of retail-based sectors, businesses should be feeling optimistic leading into the holiday season,” Mr James said.

Industry analysis

At an industry level, Business Services was the clear stand-out sector in trends terms for September; however sales also rose at Miscellaneous Stores, up 1.2 per cent, as well as in the Transportation and Contracted Services sectors, up 0.9 per cent and 0.8 per cent respectively.

The large retail sector also grew by 0.5 per cent in trends terms, after rising between 0.6-0.7 per cent per month over the previous seven months.

At the other end of the scale, sectors to experience a decline in sales in trend terms included Airlines (down 3.6 per cent), Government services (down 1.6 per cent), and Utilities (down by 0.7 per cent).

State-by-state analysis

Sales rose in only four of the states and territories in September, with Tasmania experiencing the highest growth, up 1.0 per cent, as well as South Australia (up 0.5 per cent), Western Australia (up 0.4 per cent) and Queensland (up by less than 0.1 per cent).

Sales fell the most in Victoria, down 0.8 per cent, with ACT (down 0.7 per cent), Northern Territory (down 0.5 per cent) and NSW (down 0.1 per cent) all also experiencing declines.

Tasmania also recorded the strongest growth in annual terms (up 9.1 per cent), followed by South Australia and ACT (up 8.4 per cent), Western Australia (up 7.9 per cent) and Queensland (up 5.9 per cent). Three states and territories however recorded sales figures below the previous year, with Northern Territory down 8.3 per cent, New South Wales down 4.7 per cent and Victoria down 1.7 per cent.

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.

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