Aussie retail shares supported by strong consumer spending
Consumer sentiment; Overseas arrivals & departures; ABS household survey

What happened? The weekly ANZ-Roy Morgan consumer confidence rating rose by 0.3 per cent to 111.0 (long-run average since 1990 is 112.6). Consumer views on whether it’s a ‘good time to buy a major household item’ jumped by 3.3 per cent in a positive sign for retailers.

Implications: The outlook for consumer spending remains positive, supported by rock bottom borrowing costs, elevated consumer confidence, excess household savings, solid job growth and rising asset prices. The S&P/ASX 200 Retailing index is straddling record highs, up by 10 per cent year-to-date.

Other data of note: Provisional data shows there were 115,620 arrivals into Australia in May, up by 111 per cent from April. And there were 108,270 departures, up 66.4 per cent since April.

The consumer confidence data has implications for retailers, and other consumer-focussed businesses. Tourism data is important for airlines, hotels, shops and transport operators. ABS surveys provide insights into how COVID-19 is affecting the economy.

What does it mean?

• Consumer sentiment improved last week as government restrictions were eased in Melbourne following a two-week virus lockdown. ANZ economists reported that confidence in Melbourne fell by a further 0.9 per cent, likely due to tighter travel restrictions when compared to regional Victoria, where sentiment rebounded by 4.8 per cent.

• Last week ANZ and Roy Morgan’s joint measure of consumer confidence edged higher (up 0.3 per cent), but consumers remained cautious with views on ‘current financial conditions’ (down 4.3 per cent) and ‘future financial conditions’ (down 1.5 per cent) both weakening. That said, consumer views on ‘current economic conditions’ (up 1.4 per cent) and ‘future economic conditions’ (up 2.3 per cent) both strengthened. And views on whether it’s a good ‘time to buy a major household item’ jumped 3.3 per cent in a positive sign for retailers.

• The outlook for consumer spending remains positive, supported by rock bottom borrowing costs, elevated consumer confidence, excess household savings, solid job growth and rising asset prices. The S&P/ASX 200 retailing index is straddling record highs, up by 10 per cent year-to-date.

• In a welcome boost for Aussie travel operators, 52,280 Kiwi citizens arrived on our shores in May – the most since Covid-19 international border restrictions were imposed in March 2020. While many crossed ‘The Ditch’ following the opening of the Trans-Tasman quarantine-free travel bubble in mid-April to visit family and friends, others likely escaped New Zealand’s colder weather for an Aussie beach holiday.

• And in more good news for the tourism industry, a survey of Aussie households in May by the Bureau of Statistics (ABS) found that 40 per cent of respondents said that they intend to travel between June and August 2021. Of those intending to travel, 54 per cent nominated interstate locations as their preferred destination for a holiday.

What do you need to know?

Consumer sentiment – Week ended June 13

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 0.3 per cent to 111.0 (long-run average since 1990 is 112.6). Three of the five major components of the index rose last week:

Provisional overseas travel – May

• Provisional data shows there were 115,620 overseas arrivals into Australia in May, up by 68,820 people or 111 per cent when compared to April. But arrivals are down 92.7 per cent when compared with pre-Covid levels in May 2019. There were 44,570 Australian citizen arrivals (up by 24,980 people or 127.5 per cent) and 52,280 New Zealand arrivals (up by 31,980 people or 157.5 per cent) in May.

• And there were 108,270 overseas departures in May, up by 43,210 people or 66.4 per cent when compared to April. But departures are down 93.4 per cent when compared with pre-Covid levels in May 2019. There were 41,350 Australian citizen departures (up by 17,360 people or 72.4 per cent) and 48,540 New Zealand departures (up by 24,640 people or 103.1 per cent) in May.

Household Impacts of Covid-19 Survey – May

• The May Covid-19 household survey was released by the Bureau of Statistics (ABS). In terms of key statistics:

“One in eight (or 12 per cent) Australians reported their household finances had worsened, and one in 14 (or 7 per cent) reported their household finances had improved in the last four weeks.

One in five (or 20 per cent) Australians reported their household took one or more financial actions to support basic living expenses due to a shortage of money.

Three in four (or 76 per cent) Australians reported their household could raise $2,000 for something important within a week.

The proportion of Australians with a job working paid hours was the same in May (63 per cent) and April (63 per cent).”

Published by Ryan Felsman, Senior Economist, CommSec