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Consumer confidence lifts for 3rd time in 4 weeks

Bumper Aussie winter grain crops
Consumer confidence; CBA card spending; Restaurant reservations; ABARES crop report

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 1 per cent to 91.1 (long-run average since 1990 is 112.7). Confidence has lifted in three of the past four weeks. Sentiment is up by 39.5 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

Commonwealth Bank (CBA) card spending: According to Commonwealth Bank (CBA), card spending in the week to September 4 was up 5.2 per cent on a year ago, compared to a 1.4 per cent lift for the week ended August 28. Online spending rose 21.9 per cent on a year ago (previous week: +19.5 per cent), but in-store spending was down 2.1 per cent (previous week: -5.8 per cent).

The Kepler index of retail sales reported that aggregate sales rose by 13.5 per cent last week (September 6), to be down 11.4 per cent on the year. Average transaction value fell 4.6 per cent last week but was up 21.4 per cent on a year ago. Passer-by traffic lifted 3.9 per cent last week to be down 49.9 per cent on the year. The weekly store shut down rate was steady at 27 per cent with Victoria’s rate at 81 per cent.

Restaurant dining down: Australian restaurant reservations were down 26.9 per cent on September 5 from a year earlier, a decline from the 18.4 per cent drop recorded on August 29, according to OpenTable. Sit down diners fell by 99.5 per cent in Victoria (previous: -99 per cent), but were up by 33.9 per cent in Queensland (previous: up 52.4 per cent) and 10.3 per cent in NSW (previous: +23.2 per cent).

Crop production: The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) today lifted its forecast for Australian wheat production to $28.91 million tonnes in 2020/21, a 90.6 per cent increase from a year ago. Barley output is estimated to increase by 24.6 per cent to 11.22 million tonnes in 2020/21 from a year ago. NSW winter crop production is forecast to increase by 343.5 per cent to 14.81 million tonnes.

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

What does it all mean?

• Good news for Aussie farmers. After years of drought widespread rainfall in key crop growing regions has boosted the winter harvest. In fact, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) is estimating that the wheat harvest could almost double (up 90.6 per cent) to 28.91 million tonnes in 2020/21 from a year ago. And barley production is predicted to increase by 24.6 per cent to 11.22 million tonnes in the same period. NSW stands to be the biggest beneficiary with the winter crop production up a whopping 343.5 per cent.

• Aussie consumers are feeling a bit more chipper with ANZ-Roy Morgan’s consumer confidence index lifting for the third time in the past four weeks. NSW’s success in containing virus outbreaks, the eventual easing of restrictions in Victoria, positive developments on potential COVID-19 vaccines and the arrival of warmer spring weather are likely behind the improvement in sentiment.

• The key sub-index ‘time to buy a household item’ rose by 3.9 per cent last week in a sign that consumers may be more willing to spend up on a ‘big-ticket’ goods for their homes. This follows a 13.5 per cent surge in national retail sales last week (September 6), according to Kepler Analytics.

• Australia’s ‘two-speed’ economy separating the ‘virus’ free regions from those gripped by lockdowns and virus ‘hot spot’ restrictions continues to show up in high-frequency data. Credit and debit card spending by Commonwealth Bank (CBA) customers in Tasmania (up 18.2 per cent), Western Australia (up 15.9 per cent), South Australia (up 15 per cent) all lifted last week (September 4) when compared with a year ago. But spending in the ACT (up 2.4 per cent), NSW (up 8.7 per cent) and Victoria (down 10.3 per cent) all lagged.

What do the reports and figures show?

Consumer sentiment – Week ended September 6

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1 per cent to 91.1 (long-run average since 1990 is 112.7). Confidence has lifted in three of the past four weeks. Sentiment is up by 39.5 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

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

The Commonwealth Bank (CBA) credit card data – Week ended September 4

• According to Commonwealth Bank (CBA), card spending in the week to September 4 was up 5.2 per cent on a year ago, compared to a 1.4 per cent lift for the week ended August 28. Online spending rose 21.9 per cent on a year ago (previous week: +19.5 per cent), but in-store spending was down 2.1 per cent (previous week: -5.8 per cent). Victorian card spending fell by 10.3 per cent on a year ago (previous week: ‑13.7 per cent), but Tasmanian spending was up 18.2 per cent (previous week: +10.5 per cent) compared to a year ago.

• CBA noted, “Annual spending growth had a broad based bounce in all jurisdictions over the past week, with Tasmania and South Australia rising the most. Victorian Premier Daniel Andrew’s statement (6 September) outlined a roadmap for a gentle and gradual easing in restrictions from 13 September onwards, but consumer spending is unlikely to rebound meaningfully in Victoria until November. A bounce in household spending on furnishings and equipment, transport and other miscellaneous goods and services contributed most to the lift in spending growth.”

Kepler index of retail sales activity – Week ended September 6

• The Kepler index of retail sales activity reported that aggregate sales rose by 13.5 per cent last week (September 6), to be down 11.4 per cent on the year. Average transaction value fell 4.6 per cent last week but was up 21.4 per cent on a year ago. Passer-by traffic lifted 3.9 per cent last week to be down 49.9 per cent on the year. The weekly store shut down rate was steady at 27 per cent with Victoria’s rate at 81 per cent (prior: 79 per cent).

OpenTable restaurant reservations – Week ended September 5

• Australian restaurant reservations were down 26.9 per cent on September 5 from a year earlier, a decline from the 18.4 per cent drop recorded on August 29, according to OpenTable. Sit-down diners fell by 99.5 per cent in Victoria (previous: -99 per cent), but were up by 33.9 per cent in Queensland (previous: up 52.4 per cent) and 10.3 per cent in NSW (previous: +23.2 per cent).

Moovit change in public transport demand – Week ended September 6

• Demand for public transportation – as measured by the urban trip planning app Moovit – were mixed over the week to September 6 (compared with the pre-pandemic level of January 15) from a week earlier in most of Australia’s biggest cities:

Sydney & NSW: -43.3 per cent (previous week: -43.7 per cent)

Perth: -36.5 per cent (previous week: -34.3 per cent)

Brisbane & South-East Queensland: -41.1 per cent (previous week: -42 per cent)

Melbourne & Victoria: -83 per cent (previous week: -82.6 per cent).

ABARES Australian crop report, September 2020

• According to ABARES, “Winter crop production in Australia is forecast to increase by 64 per cent in 2020–21 to 47.9 million tonnes, 20 per cent above the 10-year average to 2019–20 of 40 million tonnes. Around 60 per cent of the forecast increase in production is from increased production in New South Wales. This is an 8 per cent upward revision from the ABARES June 2020 forecast and reflects better than expected crop development during winter. Area planted to winter crops in 2020–21 is estimated to have increased by 23 per cent from the drought affected season in 2019–20.

• For the major winter crops, wheat production is forecast to increase by 91 per cent to 28.9 million tonnes, 22 per cent above the 10-year average to 2019–20 of 23.7 million tonnes. Barley production is forecast to increase by 25% to 11.2 million tonnes, 23 per cent above the 10-year average to 2019–20 of 9.1 million tonnes. Canola production is forecast to rise by 47 per cent to 3.4 million tonnes, 4 per cent above the 10-year average to 2019–20 of 3.3 million tonnes.

• Amongst other crops, chickpeas production is forecast to increase by 152 per cent to 708,000 tonnes and oats production is forecast to increase by 93 per cent to 1.7 million tonnes.”

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?

• Australia’s political stoush with our largest partner China couldn’t come at a worse time for our farmers and agricultural producers. After getting back on their feet following years of devastating drought and bushfires, rain downpours have reinvigorated crop production. In fact, ABARES is forecasting the best winter harvest in four years. But Chinese tariffs of more than 80 per cent on barley exports threaten farm incomes. And shortages of labour due to state and international border closures is another headache for rural Australia.

• Courtesy of government stimulus, mortgage relief, superannuation withdrawals and virus restrictions, Aussies have taken the opportunity to repair their household balance sheets during the pandemic. The savings rate hit a 46-year high of 19.8 per cent in the June quarter. But those with a secure job, living in virus free regions (in particular) are still spending with tradie utes clogging streets of suburbia as Australia’s home improvement boom continues. And Victorians may engage in some virus ‘revenge spend’ when they are allowed back into Melbourne’s shopping malls.

Published by Ryan Felsman, Senior Economist, CommSec