Consumer inflation expectations hit 14-month high
Consumer sentiment; Weekly payroll & jobs

• What happened? The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.3 per cent to 112.4 (long-run average since 1990 is 112.6). Consumer inflation expectations over the next two years rose from 3.9 per cent to a 14-month high of 4.2 per cent last week.

• Implications: Investors are concerned about the potential impact of rising inflation on their portfolios. Rising prices typically lower the value of savings and short-term investments, like cash, while eroding bond returns. Inflation-linked bonds, commodities, real estate, alternative assets, and growth-orientated and defensive consumer staples shares are typically considered the best ‘hedges’ (form of protection) from inflation.

• Other data of note: National payroll jobs fell by 0.9 per cent over the fortnight to June 5 with wages down by 1.6 per cent over the period. Jobs fell by 2.1 per cent in Victoria with wages 2.8 per cent lower.

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.

What does it mean?

• Consumer sentiment lifted for a second successive week, boosted by the release of stronger-than-expected jobs data on Thursday. With 115,200 jobs added in May, the unemployment rate fell from 5.5 per cent to a 17-month low of 5.1 per cent, boosting optimism about the labour market recovery following the JobKeeper expiry. The upside surprise overshadowed Sydney’s latest virus flare-up with ANZ economists reporting that confidence in the city rose by a surprising 5.2 per cent.

• But concerns about the rising cost of living resurfaced, with the ANZ/Roy Morgan measure of consumer inflation expectations over the next two years up from 3.9 per cent to a 14-month high of 4.2 per cent last week. Retail unleaded petrol prices have hit 175.9 cents a litre across suburbs in Sydney and Melbourne in recent days, just as families hit the road for the school holidays. And anyone visiting their local butcher will know that meat prices have been lifting with Meat and Livestock Australia reporting that Aussie beef prices have been the amongst the highest in the world over the past year.

• Victoria may have emerged from its lockdown, but Sydney’s growing Covid-19 cluster poses a near-term risk to Australia’s buoyant job market amid tightening government restrictions. National payrolls fell by 0.7 per cent between May 29 and June 5, led lower by Victoria (-1.6 per cent), Tasmania (-0.6 per cent) and the ACT (-0.5 per cent).

• Social distancing measures adversely affected jobs in Victoria’s Accommodation and food services (-10.2 per cent) and Arts and recreation services (-8.0 per cent) industries over the fortnight to June 5.

• Data from the National Skills Commission tomorrow is expected to show job vacancies at a 12½-year high in May with available positions at elevated levels across several industries and skill levels.

• Despite virus flare-ups, Commonwealth (CBA) Group economists expect the labour market to tighten quickly due to an exodus of foreign workers and border closures, which have reduced the supply of available workers. Competition for skilled and experienced workers could drive pay gains as firms compete for labour.

What do you need to know?

Consumer sentiment – Week ended June 20

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.3 per cent to 112.4 (long-run average since 1990 is 112.6). Three of the five major components of the index rose last week:

Weekly payrolls and wages – Fortnight ended June 5

• The Bureau of Statistics (ABS) reported that national payroll jobs rose by 6.7 per cent over the year to June 5 with wages up by 6.3 per cent. But payroll jobs fell by 0.9 per cent over the fortnight to June 5 with wages down by 1.6 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 2.3 per cent and wages are 2.1 per cent higher.

• Over the fortnight to June 5, 2021, the biggest payroll job losses were in the Victoria (-2.1 per cent), followed by Tasmania and the ACT (both -1.1 per cent). Wages fell most in Victoria (-2.8 per cent), followed by Tasmania (-2.0 per cent).

• Payroll jobs decreased by the most over the fortnight to June 5 in Accommodation and food services (-3.5 per cent) and Agriculture, forestry and fishing (-3.2 per cent). But payrolls rose by 1.1 per cent in Education and training. And wages fell 7.4 per cent in the Accommodation and food services, and were down 4.0 per cent in Financial and insurance services. Wages lifted 1.8 per cent in Education and training.

Published by Ryan Felsman, Senior Economist, CommSec