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Consumer confidence hits 13-week high

Retail, transport & restaurant demand lifts
Consumer confidence; CBA card spending; Restaurant reservations; Public transportation

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.2 per cent to a 13-week high of 93.5 (long-run average since 1990 is 112.6). Confidence has lifted in five of the past six weeks. Sentiment is up by 43.2 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 week to September 18 was up 4.3 per cent on a year ago, compared to a 4.7 per cent lift for the week ended September 11. Online spending rose 19 per cent on a year ago (previous week: +17.4 per cent), but in-store spending was down 2.4 per cent (previous week: -1.2 per cent).

The Kepler index of retail sales reported that aggregate sales rose by 8.8 per cent last week (September 20), but was still down 27.3 per cent on the year. Average transaction value fell by 1.9 per cent last week, but was still up 28.6 per cent on a year ago. Passer-by traffic rose 4 per cent last week, but was down 51.1 per cent on the year. The weekly store shut down rate nationally was unchanged at 29 per cent with Victoria’s rate at 83 per cent (prior week: 87 per cent).

Restaurant dining: Australian restaurant reservations were down 4.1 per cent on September 20 from a year earlier, firmer than the 9 per cent drop recorded on September 13, according to OpenTable. Sit down diners fell by 86.5 per cent in Victoria (previous: -99.7 per cent), but were up by 60.2 per cent in Queensland (previous: +61.6 per cent) and up 37 per cent in NSW (previous: +35.2 per cent).

Demand for public transportation as measured by the urban trip planning app Moovit lifted last week (September 21) from a week earlier in most cities (compares with pre-pandemic levels in week to January 15): Sydney & NSW: -40.6 per cent (previous week: -43.1 per cent); Perth: -33.9 per cent (previous week: -31.8 per cent); Brisbane & South-East Queensland: -37.8 per cent (previous week: -40.8 per cent); Melbourne & Victoria: -81.1 per cent (previous week: -82.9 per cent).

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

What does it all mean?

• Consumer confidence continues to gradually recover. In fact, sentiment has lifted in five of the past six weeks and is now at the highest level in 13 weeks. Of course, confidence is largely tied to Australia’s continued success in supressing the virus. With government restrictions recently eased in regional Victoria, and Melbourne likely to emerge from its lockdown in the coming weeks, Victorians are starting to feel a bit more optimistic about the future.

• Last week’s better-than-expected jobs report is also a critical factor in supporting household sentiment. In August, a surprise 111,000 jobs were added or reinstated with the jobless rate falling from 7.5 per cent to 6.8 per cent – the biggest monthly fall in the unemployment rate in 32 years.

• While the underlying details of the labour market report were mixed – with hours worked edging up just 0.1 per cent and ‘gig worker’ positions up by 50,200 – the ANZ-Roy Morgan sub-index measure of ‘future economic conditions’ rose from -3.9 points to +0.8 points last week – turning positive for the first time in three months.

• The improvement in consumer confidence during September is backed-up by an array of high-frequency data points. The Commonwealth Bank’s (CBA) credit and debit card spending data has stabilised at positive levels – to be up 4-5 per cent over the past three weeks from a year ago – after an extended period of pandemic-induced spending volatility.

• Last week, restaurant reservations were positive in Queensland (up 60.2 per cent) and NSW (up 37 per cent) compared to a year ago. And Moovit’s demand for public transport has edged higher off low levels in Sydney & NSW (-40.6 per cent) and Brisbane & South-East Queensland (-37.8 per cent) in the week to September 21 when compared with a year ago.

• The lift in demand for transport and restaurants was complimented by the latest Kepler Analytics data, which showed a promising rebound in aggregate retail sales to be up 8.8 per cent last week (September 20), despite around 83 per cent of Victorian retailers remaining closed due to virus restrictions.

What do the reports and figures show?

Consumer sentiment – Week ended September 20

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.2 per cent to 13-week highs of 93.5 (long-run average since 1990 is 112.6). Confidence has lifted in five of the past six weeks. Sentiment is up by 43.2 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

• Three out of five of the major components of the index rose last week:

The Commonwealth Bank (CBA) credit card data – Week ended September 18

• According to Commonwealth Bank (CBA), card spending in the week to September 18 was up 4.3 per cent on a year ago, compared to a 4.7 per cent lift for the week ended September 11. Online spending rose 19 per cent on a year ago (previous week: +17.4 per cent), but in-store spending was down 2.4 per cent (previous week: -1.2 per cent). Victorian card spending was down 11.1 per cent on a year ago (previous week: ‑11.3 per cent), but Western Australian spending was up 15.2 per cent (previous week: +14 per cent) compared to a year ago.

• CBA noted, “Annual spending growth in all jurisdictions broadly tracked sideways over the past week. Recreation and transport spending remains weak. Spending in the September quarter, 2020 is up on the June quarter, 2020 and has prompted us to revise our [economic growth] GDP forecasts.”

Kepler index of retail sales activity – Week ended September 20

• The Kepler index of retail sales reported that aggregate sales rose by 8.8 per cent last week (September 20), but were still down 27.3 per cent on the year. Average transaction value fell by 1.9 per cent last week, but was still up 28.6 per cent on a year ago. Passer-by traffic rose 4 per cent last week, but was down 51.1 per cent on the year. The weekly store shut down rate nationally was unchanged at 29 per cent with Victoria’s rate at 83 per cent (prior week: 87 per cent).

OpenTable restaurant reservations – Week ended September 20

• Australian restaurant reservations were down 4.1 per cent on September 20 from a year earlier, firmer than the 9 per cent drop recorded on September 13, according to OpenTable. Sit down diners fell by 86.5 per cent in Victoria (previous: -99.7 per cent), but were up by 60.2 per cent in Queensland (previous: up 61.6 per cent) and up 37 per cent in NSW (previous: +35.2 per cent).

Moovit change in public transport demand – Week ended September 21

• Demand for public transportation – as measured by the urban trip planning app Moovit – lifted over the week to September 21 (compared with the pre-pandemic level of January 15) from a week earlier in most of Australia’s biggest cities:

Sydney & NSW: -40.6 per cent (previous week: -43.1 per cent)

Perth: -33.9 per cent (previous week: -31.8 per cent)

Brisbane & South-East Queensland: -37.8 per cent (previous week: -40.8 per cent)

Melbourne & Victoria: -81.1 per cent (previous week: -82.9 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 week’s standout data release will be tomorrow’s much-anticipated preliminary retail trade figures for August. CBA Group economists expect a 4 per cent decline in spending due to Greater Melbourne’s level four restrictions – as evidenced by an easing in our weekly CBA card spending data during the month. That said, retail spending has been strong – up by 12 per cent over the year to July – to be 10.6 per cent above pre-COVID levels in February. In fact, the monthly value of retail turnover hit record highs in July.

• With JobKeeper and JobSeeker payments being pared-back shortly and unemployment remaining elevated, attention now turns to the Federal Government’s October 6 Budget. With tax cuts all but a forgone conclusion, the question now is whether Aussie consumers will continue their pandemic spending binge or prefer to bunker down over summer, saving and pay down debt.

Published by Ryan Felsman, Senior Economist, CommSec