Consumer confidence hits 19-month high
Weekly consumer confidence; Weekly payroll jobs & wages; International trade

What happened? The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.5 per cent to a 19-month high of 114.2 (long-run average since 1990 is 112.6).

The Bureau of Statistics (ABS) reported that national payroll jobs fell by 0.5 per cent over the fortnight ended May 8, 2021. And wages were down 1.3 per cent over the period.

Implications: Elevated confidence, better job security, pent-up demand, greater mobility, excess savings and rising assets prices are all spurring a lift in consumer spending. At the timing of writing, S&P/ASX200 consumer discretionary shares are up 12.6 per cent year-to-date – the second strongest performing sector – to be a massive 105.2 per cent higher since the March 23, 2020 pandemic low.

The consumer confidence data has 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 trade data is instructive on income flows in the economy and consumer and business activity and has implications for the currency.

What does it all mean?

• Consumer sentiment, as measured by ANZ and Roy Morgan, hit a 19-month high last week. Consumer views on ‘current financial conditions’ jumped 4.6 per cent to a 15-month high of 8.3 points. The improvement in household perceptions of their finances is particularly important as it will likely support consumer spending given the expiration of the JobKeeper wage subsidy.

• The consumer confidence survey comes after the release of the April jobs data, which was heavily impacted by a larger-than-usual number of Aussies taking holidays over the Easter and Anzac Day holiday period. While ‘restriction fatigue’ probably played its part, Westpac-Melbourne Institute’s consumer unemployment expectations measure fell to decade lows in May, suggesting that households are more confident about the labour market recovery – especially with job vacancies at more than 12-year highs in April.

• That said, a period of labour market adjustment is likely in the near-term following the JobKeeper expiry after a rapid recovery in the six months to March. In fact, the Bureau of Statistics (ABS) today reported that over the fortnight to May 8, 2021 payroll jobs fell by 0.5 per cent, with wages paid down 1.3 per cent. But it wasn’t all bad news as jobs lifted in some of the biggest employing sectors of the economy: Education and training (up 3.5 per cent), Public administration and safety (up 2.1 per cent) and Retail trade (up 1.1 per cent).

• From an investor standpoint, elevated confidence, better job security, pent-up demand, greater mobility, excess savings and rising assets prices are all spurring a lift in consumer spending. At the timing of writing, S&P/ASX200 consumer discretionary shares are up 12.6 per cent year-to-date – the second strongest performing sector.

• Aussie exports hit record highs and the trade surplus was the third highest on record in April. The value of Australia’s metalliferous ores and metal scrap (iron ore) exports hit all-time highs of $16.5 billion in the month. Iron ore prices have fallen sharply in recent days as China clamps down on speculative behaviour in the steel industry, weighing on mill profitability. But shares of iron ore producers, BHP, Fortescue Metals and Rio Tinto, have all lifted so far today, despite the pullback in the price of the steel-making ingredient.

What do you need to know?

Consumer sentiment – Week ended May 23

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.5 per cent to 114.2 (long-run average since 1990 is 112.6). Three out of the five major components of the index rose last week:

Weekly payrolls and wages – Week ending May 8

• The Bureau of Statistics (ABS) reported that national payroll jobs fell by 0.5 per cent over the fortnight to May 8, 2021 with wages down by 1.3 per cent. Over the year (since May 9, 2020) payroll jobs were up by 8.7 per cent with wages up 8.9 per cent.

• Compared with the start of the pandemic (since Australia recorded its 100th confirmed case of Covid-19 on March 14, 2020) payroll jobs are up 1.5 per cent and wages are 1.9 per cent higher.

• Over the fortnight to May 8, 2021, the biggest payroll job losses were in the Victoria (down 0.8 per cent), followed by Queensland (down 0.7 per cent). Payrolls lifted in South Australia (up 0.2 per cent), but were flat in the ACT. Wages fell most in Victoria (down 2 per cent), followed by Queensland (down 1.7 per cent).

• Across sectors, jobs in Agriculture, forestry and fishing decreased by 4.3 per cent, but payrolls jumped 3.5 per cent in Education and training. And wages fell 5.4 per cent in the Agriculture, forestry and fishing industry.

Preliminary international trade – April

• According to the ABS, in original terms, the value of exports of goods were broadly flat (up 0.03 per cent) in April to a record high $35.95 billion. But the value of imports fell by 6.8 per cent to $25.81 billion. The trade surplus rose from $8.23 billion in March to $10.14 billion in April – the third most on record.

• Rural exports fell 4 per cent in the month to be up 16 per cent on the year. But non-rural exports rose 2 per cent to be up 17 per cent on the year. Exports to China rose 4.3 per cent in April. Notably food and live animals exports both hit record highs in April. And exports of metalliferous ores and metal scrap rose 0.6 per cent in April to a record high $16.468 billion. Imports of road vehicles also hit all-time highs.

Published by Ryan Felsman, Senior Economist, CommSec