Spending in Australia grows at a fast pace in January

Spending in Australia rose at the fastest pace in more than four years last month with retail stores’ sales growing at record levels after eight years. Although the recent data is encouraging, Commsec says it may be too early to call a sustainable upswing.

The result suggests that improved labour market conditions may be encouraging households to spend a little more. Spending on both goods and services processed via Commonwealth Bank (CBA) terminals rose at the fastest pace in four years in January.

Australia’s retail industry can finally heave a sigh of relief as consumers finally lifted spending in retail stores in January. Shopping in retail stores saw the largest boost in more than eight years, which is perceived as an optimistic sign that the rebound in retail sales recorded in the December quarter may have extended into the early months of the year.

'Strong economic environment'

CBA’s Bank Business Sales Indicator (BSI) climbed by 1.1 percent in trend terms in January, continuing the rebound in spending that began in the final parts months of 2017. The growth was driven by retail spending along with increased spending on government services and transportation, according to CommSec chief economist Craig James.

“We are currently experiencing a strong economic environment that is being influenced by greater job growth and positive consumer confidence,” The Daily Telegraph reports him as saying.

Sales at retail and clothing stores jumped by 0.7 percent in trend terms. James explained that the huge lift in retail stores has been influenced by a solid job market as well as heightened competition, which drives lower selling prices. Meanwhile, spending on government services rose 1.6 percent and transportation climbed 1.5 percent.

The monthly acceleration saw annual growth lift from 4.9 percent to 6.2 percent, above the 3.2 percent average seen over the past decade. The BSI monitors the value of credit and debit card transactions processed with the Commonwealth Bank merchant facilities over a specific month. Sector-wise, Mail Order/Telephone Order Providers recorded a drop in spending- down 5.2 percent.

James believes that last month’s report delivered an encouraging result, but caution is still warranted. “We would need to see a number of months of stronger outcomes, including the retail data from the Bureau of Statistics, before we can conclude that we have entered a more buoyant spending environment,” he said. The country’s January retail sales report is slated for release on March 6.