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Consumer confidence hits 12-month high
Consumer confidence; CBA card spending

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.7 per cent to a 12-month high of 109.3 (long-run average since 1990 is 112.6). Sentiment has lifted in 13 of the past 14 weeks and is up by 67.4 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

Commonwealth Bank (CBA) card spending: According to the Commonwealth Bank (CBA), card spending in the fortnight to December 4 lifted by 13 per cent on a year ago (previously: +13 per cent). Spending on services rose 4 per cent from a year ago (previously: +2 per cent). And the annual growth rate of goods spending climbed 21 per cent (previously: +21 per cent). Annual growth in spending in Tasmania is strongest, up 19 per cent. Spending is weakest in South Australia (+11 per cent).

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

What does it all mean?

• Aussies are feeling chipper as we approach the Christmas-New Year holiday period. Last week the ANZ-Roy Morgan Consumer Confidence index rose by 1.7 per cent to a 12-month high of 109.3 points. Four out of the five major sub-indexes are back at pre-pandemic levels with gains strongest for consumer views on ‘current economic conditions’ (+2.9 per cent), ‘future economic conditions’ (+2 per cent) and ‘future financial conditions’ (+2 per cent).

• So why are Aussies feeling more upbeat? There was a solid rebound in economic growth in the September quarter, labour market conditions have improved, bank balances have been boosted by tax cuts, few new Covid-19 cases have been reported and expectations for a 2021 vaccine rollout are growing.

• The high savings rate, pent-up demand and international border closures are expected to drive solid growth in Christmas retail trade and New Year sales. In fact, consumer spending intentions on whether it is a good ‘time to buy a household item’ lifted 1.5 per cent last week to 17.7 points – the highest level since March 1.

• Commonwealth Bank (CBA) credit and debit card spending climbed by 13 per cent over the fortnight to December 4 from a year ago. CBA Group economists reported, “There has been a general lift in recreation (+8 per cent) spend as well as eating and drinking out as restrictions are eased in the two largest Australian states.” Notably, the annual growth rate in spending on food services – including at cafes and restaurants – was up 18 per cent last week compared to a year ago (previously: +16 per cent).

• Encouragingly, annual growth in South Australian card spending (+11 per cent) is back at pre-lockdown levels, which saw spending slow to a 7 per cent rate in late November. Nationally, annual card spending on household furnishings and equipment remains robust at a 30 per cent growth rate with Aussies keen to upgrade their living spaces while working from home.

What do the figures show?

Consumer sentiment – Week ended December 6

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.7 per cent to a 12-month high of 109.3 (long-run average since 1990 is 112.6). Sentiment has lifted in 13 of the past 14 weeks and is up by 67.4 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

The Commonwealth Bank (CBA) credit card data – Fortnight ended December 4

• According to the Commonwealth Bank (CBA), card spending in the fortnight to December 4 lifted by 13 per cent on a year ago (previously: +13 per cent). Spending on services rose 4 per cent from a year ago (previously: +2 per cent). And the annual growth rate of goods spending climbed 21 per cent (previously: +21 per cent).

• Over the fortnight, the strongest annual card spending growth rate was in Tasmania (+19 per cent), followed by Queensland and the Northern Territory (both +17 per cent); Western Australia (+15 per cent); NSW, Victoria and the ACT (all +12 per cent); and South Australia (+11 per cent).

• CBA Group economists said, “The easing of restrictions in SA has seen a lift in card spending in the state back to pre‑lockdown growth rates. There has been a general lift in recreation spend as well as eating and drinking out as restrictions are eased in the two largest Australian states. The past fortnight covers Black Friday and Cyber Monday. There is now a seasonally sharp increase in sales each year over this period. Looking at the data in annual change terms over the past two weeks removes the distortion caused by the seasonal spike in sales.”

What is the importance of the economic data?

• 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.

• 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.

What are the implications for investors?

• Aussies are in a jovial mood as we approach the end of a difficult year. The easing of virus restrictions – including state and territory border controls – have lifted spirits. Of course, confidence is crucial to the pandemic economic recovery. With consumers more optimistic, retailers look set to enjoy a bumper Christmas-New Year trading period.

Published by Ryan Felsman, Senior Economist, CommSec