Consumer confidence lifts; Reporting season retail boom?

Consumer confidence

What happened? The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.1 per cent to 101.8 (long-run average since 1990 is 112.5).

Implications: Prolonged Covid-19 delta lockdowns are likely to restrict non-retail spending with tourism constrained by border closures and government social distancing measures. While higher costs could dent profit margins for ASX-listed retailers, strong demand for household goods, solid balance sheets, excess savings and government income support are all expected to drive strong June financial year 2021 earnings results.

The consumer confidence data has implications for retailers, and other consumer-focussed businesses.

What does it mean?

• Consumer confidence, as measured by ANZ and Roy Morgan, lifted for the first time in three weeks as Melbourne (up 2.0 per cent) and Adelaide (up 2.9 per cent) emerged from their latest snap lockdowns. Of course, Sydney was a drag on overall confidence (down 7.0 per cent) as new Covid-19 daily case numbers hit record highs. That said, sentiment lifted in Brisbane by 2.7 per cent, but the survey largely took place before South-East Queensland’s lockdown was announced and subsequently extended as clusters emerged in Brisbane schools.

• Four out of five of the underlying components of the ANZ and Roy Morgan consumer sentiment index improved last week with the number of optimists outweighing the number of pessimists (i.e. index level above 100 points). The federal government and state governments of NSW and Victoria all announced an increase in financial support to households and businesses adversely impacted by recent lockdowns. The expansion of fiscal support may have boosted consumer views on their finances with ‘current financial conditions’ (up 1.0 per cent) and ‘future financial conditions’ (up 2.3 per cent) both higher last week.

• Enouragingly, the index – at 101.8 points last week – remains well above the 92.5 index average seen during Melbourne’s prolonged 112-day lockdown last year. Also, consumer views on whether it is a ‘good time to buy a major household item’ rebounded 5.3 per cent last week to be back in postive territory at 104.2 points last week.

• Focus now turns to tomorrow’s final June estimates of retail spending by the Bureau of Statistics. While preliminary retail trade fell by 1.8 per cent in the month due to Melbourne’s lockdown, nominal retail trade lifted by 1.3 per cent in the June quarter. The final release will include sales by store type, region, firm size and online versus in-store figures. Taking into account price increases, Commonwealth Bank (CBA) Group economists expect that retail trade volumes rose 0.9 per cent in the June quarter. Of course, July will see lockdown disruptions intensify, weighing on retail trade.

• Prolonged Covid-19 delta lockdowns are likely to restrict non-retail spending with tourism constrained by border closures and government social distancing measures. While higher costs could dent profit margins for ASX-listed retailers, strong demand for household goods, supported by solid balance sheets, excess savings and government income support is expected to drive strong June financial year 2021 earnings results.

What do you need to know?

Consumer sentiment – Week ended August 1

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.1 per cent to 101.8 (long-run average since 1990 is 112.5). Four out of five major sub-components increased last week:

Published by CommSec