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Consumer spending intentions hit 14-week low

WA card spending lifts; Restaurant dining down
Consumer confidence; CBA card spending; Retail spending; Restaurant reservations

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating fell by 2.4 per cent to a 15-week low of 86.5 (long-run average since 1990 is 112.7). Sentiment fell for a 7th successive week, but is still up by 32.5 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973). Consumer views on whether it’s a good or bad ‘time to buy a household item’ declined 8.6 per cent to 14-week lows of -11.2.

CBA card spending: According to the Commonwealth Bank (CBA), credit and debit card spending in the week to August 7 was up 8.4 per cent on a year ago, compared to a 3.2 per cent lift for the week ended July 31. Online spending rose 20.8 per cent (previous week: up 5.8 per cent) and in-store spending was up 2.9 per cent over the period (previous week: also up 2.9 per cent). Spending in Western Australia is up 20.2 per cent from a year ago – the strongest of all states and territories.

The Kepler index of retail sales activity reported that aggregate sales fell by 7.9 per cent last week (August 9) to be down 24.9 per cent on the year. Average transaction value rose 0.6 per cent last week to be up 21.4 per cent on a year ago. Sales were down 45.3 per cent in Victoria. Eighty-nine per cent of Victorian retail stores were closed in the past week compared with 32 per cent for all of Australia.

Restaurant dining down: Australian restaurant reservations were down 27.5 per cent on August 9 from a year earlier, according to OpenTable. Sit down diners fell by 99.8 per cent in Victoria, but were up by 48.5 per cent in Queensland and broadly flat in NSW.

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

What does it all mean?

• Western Australia (WA) could be the nation’s top performing economy during the pandemic. After a six-year downturn following the end of the mining construction boom, our most geographically isolated state has benefited from its hard state border, which has largely prevented community transmission of the virus.

• While the weak housing market and high joblessness are still impediments to the economic rebound, confidence is returning in the West. Iron ore prices are hovering around 12-month highs due to China’s industrial recovery and mining investment is picking up. New WA job ad volumes surged 89.5 per cent in the fortnight ended July 26 when compared with February, according to SEEK – the strongest growth rate of all states and territories. And card spending by the Commonwealth Bank’s WA customers was up by 20.2 per cent in the week to August 7 compared with the year before – also the strongest in the nation.

• Of course, there is a lot of volatility and dispersion in consumer confidence and retail spending surveys at the moment. Australian states and territories are experiencing varied success in supressing the second wave outbreak of the virus. While Victorians continue to contend with Stage 4 lockdown restrictions – with tentative signs of falling new case numbers – Queenslanders breathed a collective sigh of relief after the incubation period for the Logan outbreak came to an end yesterday. Restaurant dining lifted in the Sunshine State on the weekend to be up around 50 per cent from a year earlier as confidence returned.

What do the reports and figures show?

Consumer sentiment – Week ended August 9

• The weekly ANZ-Roy Morgan consumer confidence rating fell by 2.4 per cent to a 15-week low of 86.5 (long-run average since 1990 is 112.7). Sentiment fell for a 7th successive week, but is still up by 32.5 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973). Consumer views on whether it’s a good or bad ‘time to buy a household item’ declined 8.6 per cent to 14-week lows of -11.2.

• Three of the five major components of the index fell last week:

The Commonwealth Bank (CBA) credit card data – Week ended August 7

• According to the Commonwealth Bank (CBA), credit and debit card spending in the week to August 7 was up 8.4 per cent on a year ago, compared to a 3.2 per cent lift for the week ended July 31. Online spending rose 20.8 per cent (previous week: up 5.8 per cent) and in-store spending was up 2.9 per cent over the period (previous week: up 2.9 per cent).

• CBA noted: “Spending growth is volatile week to week. However the trend shows that annual spending growth has eased a little in recent weeks. Online spending remains very strong.”

• “Spending on goods remains strong while services spending is still down over the year. We don’t expect services spending to make a full recovery until all restrictions have been lifted.”

• “State trends are most interesting at the moment as restrictions vary across jurisdictions. Not surprisingly spending in Victoria remains very weak with stage 4 restrictions imposed on 2 August 2020. The full effect won’t be seen in spending until next week’s data as retail stores were allowed to operate until 6 August 2020.”

• “Spending growth is very strong in WA, with spending growth stronger than the national average across all categories. Spending is lagging behind in the ACT. A steep drop in education spending is weighing on overall spending in the ACT.”

• “Spending on food and alcohol to be consumed in the home surged over the week to 7 August in Victoria, with people required to stay at home.”

• “Spending on household furnishings & equipment is very strong in Victoria. People may have made last minute trips to the hardware store to stock up on items needed for home DIY projects and WFH requirements.”

• “But spending in many other categories is lagging in Victoria, including clothing & footwear, personal care and recreation.”

• “Transport spending is also very weak in Victoria. It is also down over the year in NSW. Other data show mobility around Sydney and particularly Melbourne is still well down from normal levels.”

Kepler index of retail sales activity – Week ended August 9

• The Kepler index of retail sales activity reported that aggregate sales fell by 7.9 per cent last week (August 9), and sales were down 24.9 per cent on the year. Average transaction value rose 0.6 per cent last week to be up 21.4 per cent on a year ago. Passer-by traffic fell 8.4 per cent last week to be down 52.1 per cent on the year.

• Sales fell in all state and territories last week except the ACT (up 6.8 per cent) and Queensland (up 1.9 per cent). Sales were down 45.3 per cent in Victoria. Eighty-nine per cent of Victorian retail stores were closed in the past week compared with 32 per cent for all of Australia.

OpenTable restaurant reservations – Week ended August 9

• Australian restaurant reservations were down 27.5 per cent on August 9 from a year earlier, according to OpenTable. Sit down diners fell by 99.8 per cent in Victoria, but were up by 48.5 per cent in Queensland and broadly flat in NSW.

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.

What are the implications for investors?

• Consumer confidence hit 15-week lows last week and tomorrow we’ll get some further insights into household views on their finances and the economy from Westpac and the Melbourne Institute. The health crisis in Victoria and the impact of the second lockdown on workers and businesses are weighing on broader consumer sentiment. Fears of rising joblessness and a prolonged recession – with restrictions possibly in place until year end – are making Aussies increasingly wary about their finances due to the deteriorating economy.

• ANZ-Roy Morgan’s weekly consumer spending intentions (‘time to buy a household item’) has fallen back to its lowest level since early May. And retail sales activity was down 7.9 per cent last week, according to Kepler Analytics. That said, ‘stay-at-home’ Aussies continue to purchase household furnishings and equipment with CBA card spending up 45.6 per cent in the past week compared with a year ago. Retailers Adairs and Nick Scali have been huge beneficiaries of Aussie spending on homewares and government stimulus during the pandemic.

Published by  Ryan Felsman, Senior Economist, CommSec