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Hotel sector’s strong growth in Australia

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Spending continued to grow steadily across the economy in August, according to the Commonwealth Bank’s latest Business Sales Indicator (BSI), with the hotel and motel sector showing the best performance.

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.

The report shows that economy-wide spending grew in August in line with the long-term average rate of 0.5 per cent, with the hotel and motel sector as the strongest annual industry performer with a 12-month increase of 26.8 per cent.

The August BSI shows sales continuing to grow at around the same steady pace as the last six months, the 37th consecutive month of sales growth nationally.

Meanwhile, the more volatile seasonally adjusted measure grew by 0.8 per cent in August, down from a 1.6 per cent increase the month before. That saw the seasonally adjusted annual growth rate ease to 9.9 per cent, down from 11.9 per cent in July.

Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank, said the latest figures are generally positive for business-owners, although they continue to reflect the transition from a mining-led economy to a broader-based growth profile.

“Overall, the August BSI shows business conditions remain favourable across most of the country. This month’s results also reveal some unevenness between regions and sectors, as businesses continue to adjust to an economy in transition,” he said.

“For business owners, it is important to be aware of these variations to ensure they are planning ahead and proactively managing their businesses cash flow,” Bennett said.

Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI report, said while there are still some areas of weakness, the overall business environment has improved.

“The latest job advertisement and unemployment data reflects a strengthening employment market, helping to underpin consumer spending. Both businesses and consumers have also been starting to take advantage of low interest rates, with lending growth continuing to recover,” he said.

“Much of that borrowing is being channelled into new housing and business investment, which should help to sustain further growth,” James said.

STATE ANALYSIS
South Australia and Queensland lead the way
During August sales rose across most of the country. South Australia was the strongest performing state for the fifth month in a row, recording growth of 1.4 per cent in trend terms, while sales in Queensland were up 1.1 per cent.

Spending has now risen for 38 straight months in Queensland, 30 months in Tasmania, 24 months in New South Wales and 23 months in South Australia. Sales in Victoria have been either flat or higher for 38 consecutive months. But sales growth in Western Australia has stalled over the last few months, with spending rising just 0.1 per cent in August after staying flat in July and falling 0.1 per cent in both May and June. Northern Territory spending was up 0.2 per cent.
Meanwhile, spending in the Australian Capital Territory fell in August, although the rate of decline slowed to only 0.1 per cent in trend terms.

INDUSTRY ANALYSIS
Service Provider sector tops monthly growth
In trend terms, 15 out of 19 industry sectors saw sales rise during August, a similar result to the previous two months. For the second month in a row, Service Providers (includes financial institutions, insurance firms and brokers) reported the largest lift in sales, with spending up an impressive 4.0 per cent, following a 3.8 per cent rise in July. Mail Order/Telephone Order Providers also recorded healthy growth, with spending up 2.3 per cent.

Meanwhile, unseasonal weather continued to impact the Clothing Stores and Utilities sectors, with spending down 1.4 per cent and 1.7 per cent respectively.

In contrast, a number of sectors have seen sales grow by 20 per cent or more over the last 12 months, including Amusement & Entertainment, Transportation, Mail Order/Telephone Order Providers, Service Providers and Wholesale Distributors and Manufacturers. The strongest performer in annual terms was the Hotel and Motel sector, with a 12-month increase of 26.8 per cent.

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