Aussie consumer shares outperform global peers; Jobs lift
Consumer sentiment; Weekly payroll & jobs
What happened? The weekly ANZ-Roy Morgan consumer confidence rating fell by 3.9 per cent to 107.8 – the third largest decline since the height of the pandemic in late March 2020.
Implications: Australia’s consumer stocks – as represented by the S&P/ASX 200 Consumer Discretionary index – have climbed 18.3 per cent this year, outperforming their global peers (MSCI World Consumer Discretionary index, up 11.2 per cent) as Aussie wealth levels increase. According to the Bureau of Statistics (ABS), Australia’s total household wealth climbed 4.3 per cent to a record $12.7 trillion in the March quarter.
Other data: National payroll jobs rose by 0.3 per cent over the fortnight to June 19 with wages up by 0.4 per cent over the period. Jobs have risen 7.3 per cent over the year to June 19 with wages up 6.8 per cent.
What does it mean?
• The ANZ and Roy Morgan measure of consumer confidence hit 19-month highs over the week ending May 23, but the index has since dipped 5.6 per cent over the period to July 4. The 3.9 per cent decline last week was the third largest fall since the height of the pandemic in late March 2020. Why? The spread of the virulent Delta Covid-19 variant, the broadening of lockdowns and the slow vaccine rollout has unsettled Aussies.
• ANZ economists reported that sentiment plunged in Sydney (down 8.9 per cent), Brisbane (down 7.7 per cent) and Adelaide (down 6.5 per cent) last week. Confidence in virus-wary Melbourne was down by 2.7 per cent even as government restrictions were eased. With Brisbane and Perth already emerging from their latest shutdowns, a snap-back in consumer sentiment and physical shopper traffic is expected, but is contingent on containing outbreaks and speeding up vaccinations. Of course, uncertainty persists about whether Sydney’s restrictions will be extended beyond this week.
• Encouragingly, Commonwealth Bank (CBA) Group economists today reported that CBA household card spending over the week ending July 2 is 16.5 per cent above 2019 levels, up from 13.9 per cent in the prior week, despite lockdowns across at least four states.
• While sentiment has been dented by virus flare ups, Aussie households continue to be supported by massive policy stimulus, a robust job market, excess savings, government income payments and the so-called ‘wealth effect’. Surging property prices and bumper superannuation returns from rising sharemarkets have emboldened consumers. According to the Bureau of Statistics (ABS), Australia’s total household wealth climbed 4.3 per cent to a record $12.7 trillion in the March quarter. As wealth levels increase, so has spending and a desire to invest in profitable consumer-facing Aussie companies. In fact, Australia’s consumer stocks – as represented by the S&P/ASX 200 Consumer Discretionary index – have climbed 18.3 per cent this year, outperforming their global peers with the MSCI World Consumer Discretionary index up 11.2 per cent in local currency terms.
• If leading indicators of jobs growth are any guide, recruitment activity remains buoyant across Australia. Both the National Skills Commission and ANZ measures of job vacancies are around the highest levels in 12½ years. In fact, ANZ reported that job ads lifted for a record 13th consecutive month in June.
• And the weekly ABS measure of national payroll jobs rose by 0.3 per cent over the fortnight to June 19 with wages up by 0.4 per cent over the period. With international borders reducing the supply of labour and employers on a hiring spree, spare capacity in the labour market has been eroded. But Reserve Bank policymakers are likely to reaffirm their commitment to drive the economy towards “full employment” to push annual wage growth to near 3 per cent and annual core inflation within the Board’s 2-3 per cent target, both pre-conditions for the next interest rate hike.
What do you need to know?
Consumer sentiment – Week ended July 4
• The weekly ANZ-Roy Morgan consumer confidence rating fell by 3.9 per cent to 107.8 (long-run average since 1990 is 112.6). All five major components of the index declined last week:
Weekly payrolls and wages – Fortnight ended June 19
• The Bureau of Statistics (ABS) reported that national payroll jobs rose by 7.3 per cent over the year to June 19 with wages up by 6.8 per cent. And payroll jobs lifted by 0.3 per cent over the fortnight to June 19 with wages up 0.4 per cent. Compared with the start of the pandemic (since Australia recorded its 100th confirmed case of Covid-19 on March 14, 2020) payroll jobs are up 3.4 per cent and wages are 4.3 per cent higher.
• Over the fortnight to June 19, the biggest payroll job gains were in the ACT (+0.6 per cent), followed by Tasmania (+0.5 per cent), and Victoria and the Northern Territory (both +0.4 per cent). Wages rose most in Tasmania (+1.6 per cent) and the Northern Territory (+1.0 per cent).
• Payroll jobs increased by the most over the fortnight to June 19 in Retail trade (+1.7 per cent), followed by Accommodation and food services (+1.4 per cent) and Transport, postal and warehousing (+1.4 per cent). But payrolls fell by the most for Agriculture, forestry and fishing (-1.6 per cent). And wages lifted 3.3 per cent in the Accommodation and food services and were 2.3 per cent higher in Retail trade. But wages fell 2.0 per cent in both the Administrative and support services and Rental, hiring and real estate services industries.
Published by Ryan Felsman, Senior Economist, CommSec