SPENDING BY BUSINESS HITS STRONGEST RISE IN THREE YEARS

Spending by Australian businesses reached the highest sales growth in three years during May, indicating there are early signs that small businesses have responded to the stimulus contained in the Federal Budget, 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 and Computers, and Computer Equipment and Software, recorded spending growth of 1.9 per cent in trend terms in May – the biggest rise since May 2012.

Overall, the broader BSI grew by 0.8 per cent in trend terms in May after similar gains in March and April. Annual sales growth stood at 7.5 per cent, well above the decade average of 5.3 per cent.

“May’s growth in sales will be welcome news for Australian business owners, suggesting businesses and consumers across the country are feeling confident about spending off the back of the Federal Budget,” said Claire Roberts, Executive General Manager, Local Business Banking, Commonwealth Bank.

“However, conditions can differ in particular industries and regions, so it’s essential that businesses continue to plan for fluctuations in sales.”

The seasonally adjusted estimate of the BSI or economy-wide spending rose for the third straight month, up by 1.0 per cent in May. This follows a 1.8 per cent lift in April and 1.8 per cent in March, capping the strongest three-month gain in two years. Annual growth remained strong at 8.4 per cent, the highest growth since November last year.

“The latest sales figures indicate that consumer spending will continue to rise in the year ahead, fuelled by low interest rates, a firmer job market and improving economic outlook,” said Craig James, Chief Economist at CommSec and author of the BSI report.

“The growth experienced by a number of industry sectors in May also suggests that businesses are responding to the stimulus measures in the latest Federal Budget, like new tax breaks for small businesses.”

INDUSTRY ANALYSIS

Across sectors, spending fell in just two of the 19 industry sectors in trend terms in May. Sectors which experienced contractions were Airlines and Mail Order/Telephone Order Providers.

Among the strongest sectors in May were Government services (up 3.1 per cent); Amusement & Entertainment (up 2.8 per cent) and Business Services (up by 1.9 per cent). The growth experienced in the Business Services sector was the biggest monthly lift in three years.

STATE BY STATE ANALYSIS

Sales rose in all states and territories in May in trend terms. The highest growth was in South Australia (up 1.3 per cent), the ACT (up by 1.1 per cent) and Victoria (up 1.0 per cent). Western Australia, NSW and Queensland all experienced the same growth (up 0.9 per cent) followed by Tasmania (up 0.3 per cent) and the Northern Territory (up by less than 0.1 per cent).

The trend BSI has risen for 47 straight months in Queensland, for 39 straight months in Tasmania, and for 12 months in ACT and Western Australia.

In annual terms, only the NSW and Northern Territory had sales below a year ago in May (down 6.1 per cent and 6.0 per cent respectively). At the other end of the scale, growth was strongest in ACT (up 15.7 per cent), South Australia (up 8.1 per cent), Western Australia and Queensland (both up 6.2 per cent), Tasmania (up 6.7 per cent) and Victoria (up 1.9 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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