I don’t trust this indicator given it only very roughly correlates to broader spending but it sure is falling off a cliff:
According to the Commonwealth Bank Business Sales Indicator (BSI), economy-wide spending was broadly unchanged in February, matching the January result but representing a clear slowdown in spending from the third quarter of 2015.
In September 2015 the BSI had lifted by 0.6 per cent, but the growth rate slowed to 0.5 per cent in October, to 0.3 per cent in November and to 0.1 per cent in December. The annual trend growth moderated from 6.3 per cent to 5.6 per cent in February – although still above the decade-average of 4.8 per cent.
The more volatile seasonally adjusted estimate of spending fell by 1.7 per cent in February after rising 1.1 per cent over the two previous months. Annual growth slowed from 7.4 per cent to 5.0 per cent.
At a sectoral level, seven of the 19 industry sectors contracted in trend terms in February, down from nine sectors in both December and January. But sales rose in six of the eight states and territories in February.
The seasonally adjusted and trend estimates of the BSI results are derived via the SEASABS statistical program from the Australian Bureau of Statistics. The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. The BSI covers spending broadly across the economy rather than just retail sales, including spending on automobiles, personal services and airlines. What does it all mean?
The slowdown in economy-wide spending matches the slowdown in the job market. Both indicators recorded outsized gains late last year before slowing over the past 3-4 months. Certainly both spending and employment had been growing well above the ‘normal’ or decade-average pace. The volatility on financial markets may have caused consumers and businesses to be more circumspect. But financial markets have become more settled in the past few weeks with consumer sentiment also lifting.
The Reserve Bank won’t be in a rush to change interest rate settings. However it will no doubt hope that the recent slowdown is just the pause that refreshes.
