Consumer confidence lifts. Strong services jobs growth.

Consumer confidence; CBA household survey; Services gauge; Budget outcome

The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.4 per cent to 107.5.

The Commonwealth Bank (CBA) Household Spending Intentions (HSI) report was released. The CBA HSI Index rose by 2.1 per cent in November to 110.3, its highest level since December 2019.

The AiGroup Performance of Services Index (PSI) rose from 47.6 in October to 49.6 in November, denoting a contraction in activity (index below 50). The employment sub-index eased from a 3-year high of 56.8 in October to 56.2 in November. That said, services employment activity has expanded for eight consecutive months.

Yesterday the Department of Finance reported that in the full 12 months to October 2021 the Federal Budget was in deficit by $74 billion or 3.5 per cent of GDP – a 17-month low.

What does it all mean?

• Consumer confidence, as measured by ANZ and Roy Morgan, rose by 1.4 per cent last week, despite growing price pressures with petrol prices hitting record highs in Sydney and Hobart last week. In fact, the ANZ-Roy Morgan measure of consumer inflation expectations over the next two years edged higher from 4.8 per cent to 4.9 per cent last week.

• ANZ economists reported that, “Among the major cities confidence increased by 5 per cent in Sydney, 1 per cent in Brisbane and 1.4 per cent in Perth, while it dropped in Melbourne (down 1.2 per cent) and Adelaide (down 0.5 per cent).”

• And four of the five key consumer sentiment sub-indexes rose last week, led higher by ‘Current financial conditions’ (up 2.1 per cent) and ‘Future economic conditions’ (up 3.8 per cent). That said, consumer views on whether it is a good ‘time to buy a major household item’ eased by 1.5 per cent.

• CBA economists released the Household Spending Intentions (HSI) report today, signalling a likely increase in retail spending during the Christmas trading period, supported by excess household savings built-up during lockdowns. The CommBank HSI Index rose by 2.1 per cent in November to 110.3, its highest level since December 2019. The lift in the index – which provides an in-depth gauge of Australian consumer spending using CBA and Google data – was driven by solid gains in Transport (up 21.5 per cent), Travel (up 14.7 per cent), Retail (up 9.6 per cent) and Household services (up 9.4 per cent). But Home buying intentions fell by 27.5 per cent.

• Data from the Australian Industry Group (AiGroup) today shows a stabilisation in activity in Australia’s services sector. The Performance of Services index contracted for a fourth successive month in November, but is now just below the neutral 50 level, which separates a contraction from expansion in activity. The AiGroup employment sub-index eased from a 3-year high of 56.8 in October to 56.2 in November, but expanded for an eighth successive month.

• The Department of Finance released its latest Budget update yesterday. The Federal Government reported that in the full 12 months to October 2021 the Federal Budget was in deficit by $74 billion or 3.5 per cent of GDP, a 17-month low. The Mid-Year Economic and Fiscal Outlook (MYEFO) is scheduled for release on December 16, 2021 with Treasurer Josh Frydenberg recently confirming that the government’s forecast for economic growth in 2022 will be stronger-than-predicted in the May Budget.

What do you need to know?

Consumer sentiment – Week ended December 5

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.4 per cent to 107.5 (long-run average since 1990 is 112.4). Four out of the five major sub-components rose last week.

CBA Household Spending Intentions index (HSI) – November

• The CommBank Household Spending Intentions (HSI) Index rose by 2.1 per cent in November to 110.3, its highest level since December 2019, driven by solid gains in spending on Transport (up 21.5 per cent), Travel (up 14.7 per cent), Retail (up 9.6 per cent) and Household services (up 9.4 per cent).

• CBA economists reported, “Transport spending has risen 52 per cent since the Delta lockdown low of August 2021. Fuel stations, taxis, tyre stores, car parking, auto repairs, towing and freight & trucking services have led the surge. Travel spending also rose by a significant 77 per cent over the same period, with the largest increases in hotels, motels and resorts, travel agents, airlines and tourist attractions.”

AiGroup Performance of Services index – November

• The AiGroup Performance of Services Index (PSI) rose from 47.6 in October to 49.6 in November, denoting a contraction in activity (index below 50). The employment sub-index eased from a 3-year high of 56.8 in October to 56.2 in November.

• AiGroup economists reported, “The Australian services sector was broadly stable in November, underachieving relative to expectations of a more convincing recovery after the COVID-19 downturn in recent months. Service businesses will be hoping for a stronger rebound in performance over the holiday months.”

Federal Budget update – October

• Yesterday the Department of Finance reported that in the full 12 months to October 2021 the Federal Budget was in deficit by $74 billion or 3.5 per cent of GDP – a 17-month low.

• The underlying cash balance for the financial year to October 31, 2021 was a deficit of $43.9 billion, which is $7.8 billion lower than the 2021/22 Budget profile deficit of $51.8 billion.

• The fiscal balance for the 2021/22 financial year to October 31, 2021 was a deficit of $40.9 billion against the Budget profile deficit of $52.5 billion.

• The Mid-Year Economic and Fiscal Outlook (MYEFO) is scheduled for release on December 16, 2021.

Published by Ryan Felsman, Senior Economist, CommSec