Biggest fall in consumer confidence in 14 weeks

Consumer confidence; CBA card spending

The weekly ANZ-Roy Morgan consumer confidence rating fell by 2.8 per cent – the most in 14 weeks – to 106.

Commonwealth Bank (CBA) national credit and debit card spending is 23.2 per cent higher for the week ending November 12, 2021 when compared to the corresponding week in 2019.

What does it all mean?

• Consumer confidence, as measured by ANZ and Roy Morgan, dropped by almost 3 per cent last week – the most in 14 weeks – with sentiment falling across all states except for Queensland. Confidence had hit 17-week highs in the previous week on optimism about the economic reopening with double-dose Covid-19 vaccination rates over 80 per cent in Australia’s south-east.

• But optimism ebbed last week after the release of disappointing employment data for October with the national unemployment rate unexpectedly jumping from 4.6 per cent to a 6-month high of 5.2 per cent. While an improvement in labour demand is likely from November, as government restrictions are progressively wound back, the pressures posed by the rising cost of living are very much ‘front-of-mind’ for Aussies.

• The ANZ-Roy Morgan measure of consumer inflation expectations over the next two years hit an equal 6½-year high of 5 per cent last week. Record petrol prices, higher food prices, elevated utilities bills and annual insurance price hikes are worrying households ahead of the Christmas shopping period. And anyone trying to book a domestic holiday will have encountered a sharp lift in the cost of accommodation due to a surge in demand for summer getaways.

• Rising costs of inputs and production, due to supply chain disruptions and labour shortages, could eventually lead businesses to pass-on these higher costs to consumers through price hikes. As evidenced in the US, rising consumer inflation expectations could dampen confidence with people reluctant to spend in the near-term, especially delaying ‘big-ticket’ purchases. In fact, the closely-followed question of whether it is a good ‘time to buy a major household item’ dipped by 3.4 per cent to last week.

• That said, Aussies have amassed a massive amount of savings during the pandemic with strong pent-up demand supporting spending. In fact, the post-lockdown recovery in CBA credit and debit card spending data continued in NSW, Victoria and the ACT last week with big increases in spending on clothing and footwear, general retail, eating and drinking and recreation.

What do you need to know?

Consumer sentiment – Week ended November 14

• The weekly ANZ-Roy Morgan consumer confidence rating fell by 2.8 per cent – the most in 14 weeks – to 106.0 (long-run average since 1990 is 112.4). Four out of the five major sub-components fell last week.

CBA credit and debit card spending data – Week ended November 12

• CBA economists said, “National [credit and debit card] spending was 23.2 per cent higher than the corresponding week in 2019. That is a 3.2 percentage point increase from a fortnight ago, when spending was tracking at 20 per cent above 2019 levels. “

• For Victoria: CBA economists said, “Spending growth in Victoria rebounded strongly over the past fortnight. It spiked higher from 10 per cent above 2019 levels a fortnight ago to a massive 33 per cent a week later on re‑opening effects before paring back to now be 24 per cent higher than 2019 levels. There were large increases in spending on clothing & footwear, general retail and recreation.”

• For NSW: CBA economists said, “NSW, which is furthest along in the reopening among the previously locked down east coast states, recorded spending growth of 21.8 per cent above 2019 levels. Several categories of spending, including recreation and general retail are above their pre‑lockdown pace of growth and spending on eating and drinking out rose over the fortnight.”

• For other states and territories: CBA economists said, “In the other states and territories, spending growth remains broadly in line with the pace over the past several months. Northern Territory was the exception where COVID‑related restrictions were put in place following the territory’s first case of community transmission. As with past snap lockdowns, consumer spending there is expected to rebound as restrictions are lifted.”

Published by Ryan Felsman, Senior Economist, CommSec