Consumer confidence hits 15-month high, Payrolls lift

Stampede to Aussie regions, Insolvencies hit 9-month high
Consumer confidence; CBA card spending; Payrolls; Internal migration; Insolvencies

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 0.8 per cent to a 15-month high of 112.1 (long-run average since 1990 is 112.6).

Commonwealth Bank card spending: According to the Commonwealth Bank (CBA), credit and debit card spending in the week to January 29 lifted by 13.2 per cent on a year ago (previously: +11.4 per cent).

Survey of payrolls & wages: According to the Australian Bureau of Statistics (ABS), in the period from 2-16 January, 2021, Australian payroll jobs and total wages both rose by 1.3 per cent.

Internal migration: In the September 2020 quarter, 76,200 people moved interstate – the fewest in 6 years. Interstate migration was 12.2 per cent lower than a year ago. Capital cities had a net loss of 11,247 people from internal migration – the biggest quarterly fall on record. But the “rest of state areas combined” (regional Australia) had a record net quarterly gain of 11,247 people from internal migration.

Insolvencies: The number of companies entering external administration rose from 306 in November to a 9-month high of 462 in December, according to the Australian Securities & Investment Commission (ASIC). Business insolvencies had hit a 20-year low of 275 in August.

The consumer confidence and card spending figures have implications for retailers, and other consumer-focussed businesses. The payroll and wage data helps government with decisions on assistance measures for households and businesses. The internal migration data has importance for retail and housing businesses and government planners as well as infrastructure and utility companies. The insolvencies data has implications for financial providers, consumer confidence and retail spending.

What does it all mean?

• Consumer confidence hit 15-month highs last week. The continued suppression of Covid-19 community transmission in Australia’s most populous cities led to an easing of government restrictions on Australia’s East Coast, likely boosting consumer morale. But ANZ economists cautioned, “News of the lockdown of Perth and southwest Western Australia came too late to impact the survey.”

• Encouragingly, the ANZ-Roy Morgan measure of ‘current financial conditions’ jumped 3.9 per cent last week to a 10½-month high of 1.4 points. And ‘future financial conditions’ rose 3.1 per cent to a 20-month high of 29.6 points. The improved assessment of personal financial conditions coincided with a rebound in Commonwealth Bank (CBA) household credit and debit card spending last week. Annual card spending growth lifted by 13.2 per cent in the week to January 29, up from an 11.4 per cent pace in the previous week.

• The CBA annual card spending growth rate in Western Australia was the second highest (+17.4 per cent) of all states and territories last week, but CBA economists warned, “spending is likely to see a sharp drop in the week ahead,” following the announcement of the five-day lockdown in Perth from January 31.

• CoreLogic data released yesterday showed that regional home prices surged by 7.9 per cent over the year to January 2021 – the strongest annual growth rate in 16 years. Why? Aussies have left capital cities in their droves and flocked to regional towns and cities during the pandemic, perhaps attracted to greater work flexibility, lifestyle reasons and better housing affordability.

• Interstate border closures and lockdowns saw just 76,200 Aussies move interstate in the September quarter, 2020 – the fewest people in six years. The Bureau of Statistics data shows that capital cities saw their biggest quarterly loss of people from internal migration on record (data going back to September 2001). In fact, 11,247 people left capital cities in the quarter and moved to regional areas (“rest of state areas combined”). So which regions saw the most new arrivals? The “Rest of Queensland” saw net internal migration of 4,022 people, followed by “Rest of Victoria” (+3,696 people) and “Rest of NSW” (+3,672 people) in the quarter.

• The Federal Government’s JobKeeper wage subsidy scheme has been incredibly successful at protecting Aussie jobs and shielding businesses from the economic fallout from the pandemic. In fact, Australian companies entering external administration hit a 20-year low of just 275 in August 2020. But insolvencies rose to 462 in December 2020 – the highest since March 2020. Other (business & personal) services had the most bankruptcies at 159 (or 34 per cent of total), followed by construction at 113 bankruptcies (or 24 per cent of total).

The Commonwealth Bank (CBA) credit and debit card data – Week ended January 29, 2021

• According to the Commonwealth Bank (CBA), credit and debit card spending in the week to January 29, 2021 lifted by 13.2 per cent on a year ago (previously: +11.4 per cent). Spending on services rose 6.4 per cent from a year ago (previously: +3.1 per cent). The annual growth rate of goods spending climbed 19.6 per cent (previously: +19.6 per cent). Online spending rose by 21.0 per cent from a year ago (previously: +17.5 per cent) with in-store spending up 11.1 per cent (previously: +9.9 per cent).

• Over the week, the strongest annual card spending growth rate was in Northern Territory (+17.5 per cent), followed by Western Australia (+17.4 per cent), South Australia (+16.8 per cent), Tasmania (+16.6 per cent), Queensland (+15.4 per cent), Victoria (+11.7 per cent), NSW (+11.6 per cent) and the ACT (+11.6 per cent).

Payrolls and wages – Fortnight ending January 16, 2021

• According to the ABS, in the period from January 2 – January 16, 2021, Australian payroll jobs and total wages both rose by 1.3 per cent. But payrolls (-4.3 per cent) and wages (-5.2 per cent) are still down when compared to March 14, 2020 (the week Australia recorded its 100th confirmed COVID-19 case).

• Payrolls across state and territories from January 2 – January 16: NSW (+0.7 per cent); Victoria (+0.7 per cent); Queensland (+2.8 per cent); South Australia (+2.4 per cent); Western Australia (+1.3 per cent); Tasmania (+2.0 per cent); Northern Territory (+0.5 per cent); and the ACT (+1.0 per cent).

• Over the fortnight ended January 16, the largest changes across industry were:

Payroll jobs: Manufacturing increased by 6.5 per cent and Construction increased by 5.9 per cent.

Total wages: Administrative and support services increased by 12.1 per cent and Construction increased by 11.3 per cent.

Employment size payroll jobs: Under 20 employees (+0.7 per cent); 20-199 employees (+2.6 per cent); 200 employees and over (+1.0 per cent).

• The ABS reported, “With the start of a second year of data we can see payroll jobs were 1.0 per cent lower in the week ending 16 January 2021 than they were in the week ending 18 January 2020. The challenge with new data is to be able to distinguish between changes in the economy and regular seasonal changes. Annual comparisons are a useful way of accounting for seasonality, until we have enough data to produce seasonally adjusted figures.”

Internal Migration – September quarter, 2020

The Australian Bureau of Statistics (ABS) reported:

• “In the September 2020 quarter, 76,200 people moved interstate. This was 9,200 (11 per cent) less than the number who moved in the previous quarter and 10,600 (12 per cent) less than in the September 2019 quarter.

• The number of interstate movers in the September 2020 quarter was the lowest since the September 2014 quarter.

• Queensland gained the most people from net interstate migration (+7,200) over the September 2020 quarter, while New South Wales lost the most (-4,100).

• Western Australia had the largest change in net migration, increasing from -230 people in the previous quarter to +630 people in the September 2020 quarter. This was a result of departures (6,900 to 5,900) decreasing more than arrivals (6,700 to 6,500).

• In the September 2020 quarter there was a net loss of 11,200 people from Australia’s greater capital cities through internal migration. This was a larger net loss than in the previous quarter (-11,000) and the September 2019 quarter (-5,600).

• The net loss was the result of 41,800 arrivals (down from 46,800 in the September 2019 quarter) from and 53,000 departures (up from 52,400 in September 2019) to non-capital city areas.

• Brisbane gained the most people through net internal migration (+3,200) while Sydney lost the most (-7,800) in the September quarter of 2020.

• Sydney had the largest change in net migration, from -6,400 in the previous quarter to -7,800 in the September 2020 quarter. The next largest change was in Perth, which increased from +400 to +1,400.”

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.

• The ABS data Weekly payroll jobs and wages “provides indicative information on the economic impact of the COVID-19 coronavirus on employees, including changes in employee jobs, changes in total wages, and changes in average weekly wages per job.”

• The ABS produces quarterly provisional statistics on internal migration between states and territories, and Greater Capital City Statistical Areas (GCCSAs) of Australia. Internal migration is the movement of people across a specified boundary within Australia involving a change in place of usual residence.

• The Australian Securities & Investment Commission (ASIC) statistics record the number of companies entering into a form of external administration for the first time each month.

What are the implications for investors?

• The health of Aussie small and medium-sized enterprises (SMEs) will come into sharper focus in 2021 following the end of ‘safe harbour’ insolvency moratoriums on December 31, 2020. And the JobKeeper subsidy will likely end on March 31, 2021. With the stimulus ‘band aid’ ripped off, business insolvencies are expected to rise. In fact, recent Commonwealth Treasury data shows that “Other services” is one of the most dependent industries on JobKeeper with over 40 per cent of total wage subsidy claimants. Already bankruptcies are highest in this industry. The removal or tapering of government stimulus presents downside risks to the post-pandemic economic recovery.

• The weekly payrolls data was choppy over the Christmas-New Year period due to seasonal volatility. But a deeper dive into the figures shows that total payrolls are above pre-pandemic levels in several industries – most notably education, finance, health care and public administration. But the unevenness of the pandemic labour market shock remains evident with payroll levels still lower for the hard-hit food and accommodation, retail, transport and construction sectors.

Published by Ryan Felsman, Senior Economist, CommSec