Consumer spending intentions hit 13-month high
Weekly consumer confidence; CBA credit & debit card spending

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating fell by 1.4 per cent to 112.4 (long-run average since 1990 is 112.6). But confidence is still up by 72.1 per cent since hitting record lows of 65.3 on March 29, 2020 (lowest since 1973).

Households keen on major purchases: Last week the measure of whether it was a ‘good time to buy a major household item’ rose by 0.9 per cent to a 13-month high of 20.8 points.

Credit & debit card spending: The Commonwealth Bank (CBA) measure of household card spending in the week to April 23, 2021 was up by 26.8 per cent on 2019. CBA is now using 2019 as the base of comparison, rather than 2020, noting it was a more “normal” year for spending.

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

What does it all mean?

• Consumer sentiment, as measured by ANZ and Roy Morgan, has been volatile in April, but was broadly flat last week compared to the end of March. While Australia’s economic recovery has strengthened, persistent snap lockdowns by state governments continue to undermine confidence. In fact, ANZ economists reported that consumer sentiment in Perth dropped 8.2 per cent last week after a snap 3-day lockdown was announced for Perth, Peel and Rottnest Island from midnight on Saturday 24 April 2021. Retail spending in WA over the Anzac Day long weekend is likely to have fallen sharply.

• But it wasn’t all bad news with consumer spending intentions remaining positive. Last week the ANZ-Roy Morgan measure of whether it was a ‘good time to buy a major household item’ lifted 0.9 per cent to a 13-month high of 20.8 points. And the Commonwealth Bank’s (CBA) measure of household credit and debit spending was up by 26.8 per cent in the week to April 23, 2021 compared with 2019. CBA economists reported that card spending has increased across all states in territories in recent weeks, with spending on clothing & footwear, medical care & pharmaceuticals, personal care, household furnishings & equipment, transport and recreation all lifting.

What do you need to know?

Consumer sentiment – Week ended April 25

• The weekly ANZ-Roy Morgan consumer confidence rating fell by 1.4 per cent to 112.4 (long-run average since 1990 is 112.6). But confidence is up by 72.1 per cent since hitting record lows of 65.3 on March 29, 2020 (lowest since 1973).

The Commonwealth Bank (CBA) credit and debit card data – Week ended April 23

• The Commonwealth Bank (CBA) measure of household card spending in the week to April 23, 2021 was up by 28.6 per cent on 2019. CBA is now using 2019 as the base of comparison, rather than 2020, noting it was a more “normal” year for spending.

• Online spending (up 46.4 per cent) is growing at a much faster rate than 2019 with in-store spending up 19.5 per cent. Spending on goods (up 27.6 per cent) and services (up 26.0 per cent) also moved higher over the period.

• According to CBA economists, “Card spending has moved higher in all states and territories over recent weeks. We have also seen lifts in card spending on clothing & footwear, medical care & pharmaceuticals, personal care, household furnishings & equipment, transport and recreation. Weaker base effects impacted medical care and personal care. Spending on eating and & drinking out did lose some momentum in the past week.”

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.

What are the implications for investors?

• Australia’s high frequency economic indicators – including driving mobility, retail & recreation visitation, restaurant bookings, weekly payroll jobs and consumer sentiment – are likely to be weighed down by Perth’s latest lockdown.

• Speeding up Australia’s vaccination rollout and immunisation rates are key to increasing mobility and economic activity. Until then, we remain vulnerable to virus outbreaks and government containment measures.

• Investors focused on trends in consumer spending should look out for third quarter 2021 sales results from grocery giant Coles Group tomorrow. And supermarket chain Woolworths releases its sales figures on Thursday.

Published by Ryan Felsman, Senior Economist, CommSec