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Biggest lift in consumer confidence in 3 months

Retail store shutdowns hit 13-week high
Consumer confidence; CBA card spending; Restaurant reservations; Public transport use

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 4.6 per cent to 92.7 – the biggest increase in 3 months (long-run average since 1990 is 112.7). Sentiment is up by 42 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

Commonwealth Bank (CBA) card spending: According to CBA, card spending in the week to August 21 was up 5.1 per cent on a year ago, compared to a 3.6 per cent lift for the week ended August 14. Online spending rose 26.2 per cent on a year ago (previous week: +21.2 per cent), but in-store spending was down 3.8 per cent (previous week: -4.5 per cent).

The Kepler index of retail sales reported that aggregate sales fell by 3.1 per cent last week (week to August 23), to be down 23.7 per cent on the year. Average transaction value fell 1.9 per cent last week but was up 25.6 per cent on a year ago. Passer-by traffic lifted 1.8 per cent last week to be down 53 per cent on the year. The weekly store shut down rate hit a 13-week high of 34 per cent.

Restaurant dining down: Australian restaurant reservations were down 17.8 per cent on August 22 from a year earlier, according to OpenTable. Sit-down diners fell by 99.1 per cent in Victoria, but were up by 50 per cent in Queensland and 22.6 per cent in NSW.

Demand for public transportation as measured by the urban trip planning app Moovit dropped last week (August 23) from a week earlier in most cities (compares with pre-pandemic levels in week to January 15): Sydney & NSW: -45.6 per cent (previous week: -45.8 per cent); Perth: -35.5 per cent (previous week: -32.5 per cent); Brisbane & South-East Queensland: -37.3 per cent (previous week: -39.8 per cent); Melbourne & Victoria: -83.8 per cent (previous week: -82.5 per cent).

The consumer confidence and credit card spending figures have implications for retailers, and other consumer-focussed businesses.

What does it all mean?

• The slowing of new coronavirus cases and some progress in the development of COVID-19 treatments are boosting the morale of Aussie consumers. Encouragingly, ANZ-Roy Morgan’s consumer sentiment index has lifted for consecutive weeks with last week’s gain the most in three months. Consumers’ views on their ‘future’ finances (over the next 12 months) rose by 2.7 per cent to a 10-week high of 18.4. Despite high unemployment, both government stimulus payments and superannuation withdrawals are supportive of household incomes in the near term.

• Credit and debit card spending by Commonwealth Bank (CBA) customers also lifted last week (August 21) to be up 5.1 per cent on a year ago. With Victoria in lockdown and many in Sydney self-regulating at home due to ongoing virus outbreaks, online spending surged by 26.2 per cent in the past week when compared to a year ago – the strongest reading in 2020.

• That said, Kepler Analytics reported that aggregate retail sales were down 3.1 per cent last week (August 23). While spending in Victoria rose 8.2 per cent in the past week – following a 83.6 per cent drop in sales the previous week – sales eased in Queensland (-7.8 per cent), Western Australia (-4.9 per cent) and Tasmania (-4.5 per cent).

• According to Kepler, 90 per cent of Victorian retail stores remained closed last week with major shopping precincts – Chadstone, Chapel Street, DFO Moorabbin, DFO Essendon, Westfield Fountain Gate and Melbourne Central – all shut. Overall, the weekly national retail store shut down rate hit a 13-week high of 34 per cent last week.

What do the reports and figures show?

Consumer sentiment – Week ended August 23

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 4.6 per cent to 92.7 – the biggest increase in 3 months (long-run average since 1990 is 112.7). Sentiment is up by 42 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

• All five major components of the index rose last week:

The Commonwealth Bank (CBA) credit card data – Week ended August 21

• According to Commonwealth Bank (CBA), card spending in the week to August 21 was up 5.1 per cent on a year ago, compared to a 3.6 per cent lift for the week ended August 14. Online spending rose 26.2 per cent on a year ago (previous week: +21.2 per cent), but in-store spending was down 3.8 per cent (previous week: -4.5 per cent). Victorian card spending fell by 10 per cent on a year ago (previous week: -14.8 per cent), but Tasmanian spending was up 18.4 per cent (previous week: +17.6 per cent) compared to a year ago.

• CBA noted, “Services spending is still down over the year. We don’t expect services spending to make a full recovery until all restrictions have been lifted. The various restrictions across Victoria and NSW are weighing on services spending, particularly in the eating and drinking out categories.

• Over the week ending 21 August Victoria spending lifted a little to be down by 10 per cent compared to a year ago. The slight improvement was driven mainly by education spending. Green shoots are emerging for the mining states of Queensland & Western Australia.

• Tasmania has shown strong spending relative to other states over recent weeks. The volatility in ACT-wide spending is explained by the spike and subsequent retreat in education spending.

• Source: Kepler AnalyticsSpending in the Northern Territory and South Australia looks to have stabilised for now. The divergence between state in-store spending is material. State success in controlling COVID-19 will likely continue to dictate in-store spending patterns. In-store spending is strongest for Western Australia, Queensland and Tasmania. But Victoria in-store spending remains extremely weak.

• In the ACT, Queensland and Victoria education spending has been volatile as universities in these states defer university semester 2 fee deadlines relative to last year. The spike in education payments in Victoria contributed to the lift in national online spending over the week.

• In Victoria, the various COVID-19 restrictions have seen spending at pubs, bars and nightclubs remain very weak. This also looks to have partially spilled-over into NSW. Meanwhile, in Western Australia drinking-out has thrived over the past five weeks with spending up around 40 per cent on year-ago levels.

• Personal care is another area Victorian businesses have been hit particularly badly, with restrictions stopping many of these goods and services being sold. Annual growth in personal care spending has dipped a little in NSW in recent weeks but it is still in positive territory.”

Kepler index of retail sales activity – Week ended August 23

• The Kepler index of retail sales activity reported that aggregate sales fell by 3.1 per cent last week (August 23), to be down 23.7 per cent on the year. Average transaction value fell 1.9 per cent last week but was up 25.6 per cent on a year ago. Passer-by traffic lifted 1.8 per cent last week to be down 53 per cent on the year. The weekly store shut down rate hit a 13-week high of 34 per cent.

OpenTable restaurant reservations – Week ended August 22

• Australian restaurant reservations were down 17.8 per cent on August 22 from a year earlier, according to OpenTable. Sit down diners fell by 99.1 per cent in Victoria, but were up by 50 per cent in Queensland and 22.6 per cent in NSW.

Moovit change in public transport demand – Week ended August 23

• Demand for public transportation – as measured by the urban trip planning app Moovit – dropped over the week to August 23 (compared with the pre-pandemic level of January 15) from a week earlier in most of Australia’s biggest cities:

Sydney & NSW: -45.6 per cent (previous week: -45.8 per cent)

Perth: -35.5 per cent (previous week: -32.5 per cent)

Brisbane & South-East Queensland: -37.3 per cent (previous week: -39.8 per cent)

Melbourne & Victoria: -83.8 per cent (previous week: -82.5 per cent).

What is the importance of the economic data?

• The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.

• The weekly Commonwealth Bank (CBA) credit & debit card spend data is derived from transaction authorisations to give a near real-time view. This means that cancelled authorisations, refunds, reversals, etc. will not be included. Data has not been adjusted for effects of consumers substituting between cash and card payments. CBA merchant facility spend data is derived from the Merchant Acquiring System which includes net sales from both CBA and Other Financial Institution (OFI) domestic and international cards.

• Kepler Analytics have “sensors in over 3500 locations globally, collecting traffic and other consumer behaviour data anonymously.” Kepler notes “Our clients provide us with their daily sales targets, actual POS sales and other specific data points on which they measure and manage their businesses. By aggregating and anonymising this information, we can provide unique insights into the Retail Industry as a whole.”

• OpenTable tracks more than 54,000 restaurants on its reservation site. The data captures online and phone reservations as well as walk-ins. Take-out and deliveries are excluded. Only states or cities with 50+ restaurants in the sample are included.

• Moovit analyses the repercussions of Coronavirus (COVID-19) on public transportation ridership, relative to the typical usage before the outbreak began. Updated daily, Moovit’s insights show the percentage of changed demand for public transit around the world.

What are the implications for investors?

• The back-to-back gains in the ANZ-Roy Morgan consumer confidence index are encouraging. Aussie consumers have certainly shown a willingness to spend with the ‘stay-at-home’ economy booming. Total monthly retail turnover hit a record $30.7 billion in July. Consumer spending is being supported by government stimulus payments and superannuation withdrawals – led by a 30 per cent surge in sales of household goods in July compared to a year ago – as Aussies look to improve their living conditions.

• But will it continue? So far high frequency data suggests that retail spending has moderated in August. CBA household credit and debit card spending was little changed over the week ending August 21. Mobility indexes around restaurant dining and public transport usage have declined due to the imposition of level four restrictions in Victoria. The Oxford University stringency index of coronavirus policy restrictions is at 79.2 – the highest level during the pandemic. And retail store shutdown rates are the highest in 13 weeks – impacting in-store sales. Of course, the consumer outlook is highly dependent on the continuing ‘sugar-hit’ from government stimulus, developments in the job market and ongoing success at containing and supressing the virus.

Published byRyan Felsman, Senior Economist, CommSec