Consumer spirits lift; Job ads fall by over 10%
Consumer confidence; Job ads; Trade; Services gauge; COVID-19 survey
Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 10.1 per cent to 71.9 points – the biggest lift since August 31 2008. Sentiment was up from a record low of 65.3 points.
Job advertisements: ANZ job advertisements fell by 10.3 per cent in March after rising by 1.2 per cent in February. It was the biggest fall in job ads since the global financial crisis. But the survey doesn’t pick up any direct hiring of staff by major employers like Woolworths and Coles.
Foreign trade: The trade surplus was $4.361 billion in February (forecast $3.8 billion surplus). The rolling annual surplus was $67.472 billion in the year to February, down from $67.573 billion in January.
Services gauge: The AiGroup Performance of Services index fell from 47.0 points to an 11-year low of 38.7 points in March. A reading below 50 signifies contraction in activity.
New motorcycle sales: In the March quarter, 17,977 new motorcycles, all-terrain vehicles and scooters were sold, down 2.5 per cent on a year ago.
COVID-19 survey: Two-thirds of Aussie businesses reported that their turnover or cash flow had reduced as a result of COVID-19.
The consumer confidence figures have implications for retailers, and other consumer-focussed businesses. The job advertisements data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies such as SEEK. The trade data is instructive on income flows in the economy and consumer and business activity.
What does it all mean?
• Aussie consumers gave the Federal government’s $130 billion ‘JobKeeper’ wage subsidy package the ‘thumbs up’. While not a panacea for all workers adversely impacted by coronavirus-enforced shutdowns, around six million Aussies are expected to receive the $1,500 fortnightly payment from May 1 – for around six months – backdated to March 30. But some ‘kinks’ need to be ironed-out by the government – most notably for the 950,000 casual workers not eligible for the ‘JobKeeper’ safety net.
• The raft of stimulus measures from the Reserve Bank, Federal Government and State and territory governments are lifting Aussie spirits. And the early signs of ‘curve flattening’ of COVID-19 active cases have shown people that there is light at the end of the tunnel. Cheaper petrol prices and a firmer sharemarket also served to lift the mood.
• Job ads fell in March. Arguably the decline could have been greater than the estimated 10.3 per cent. But these are still early days in the virus crisis. It’s also important to note that major employers like Coles and Woolworths largely recruited staff directly rather than through job search websites. The JobSeeker and JobKeeper schemes will be important in keeping people in work and putting dollars in people’s pockets.
What do the figures show?
Consumer sentiment – Week ended April 5
• The weekly ANZ-Roy Morgan consumer confidence rating rose by 10.1 per cent – the biggest lift since August 31 2008 – to 71.9 points. Sentiment was up from a record low of 65.3 points in the previous week.
• Four of the five major components of the index rose last week:
The estimate of family finances compared with a year ago was up from -31.6 points to -25.6 points;
The estimate of family finances over the next year was up from -12.5 points to -2.5 points;
Economic conditions over the next 12 months was up from -64.6 points to -55.9 points;
Economic conditions over the next 5 years was down from -17.1 points to -17.6 points;
The measure of whether it was a good time to buy a major household item was up from -47.9 points to -38.8 points.
• The measure of inflation expectations fell from 4.3 per cent to 4.1 per cent.
• ANZ job advertisements fell by 10.3 per cent in March after rising by 1.2 per cent in February (previously +0.7 per cent). Ads were down by 18.2 per cent over the year to 136,235. In trend terms, ads fell 2 per cent in March to be down 13.1 per cent on the year.
• According to weekly figures from job-search firm, Indeed, “Australian job postings are 41 per cent lower than their trend at the same point last year, with the gap widening by the day. New job postings, those on Indeed AU for 7 days or less, are down 57 per cent.”
• “Job postings are holding up better in New South Wales and Tasmania than in other states. The greatest decline, compared with last year’s trend, was in Victoria.”
International trade – February
• The trade surplus fell from $4.745 billion in January (previously $5.21 billion) to $4.361 billion in February. Australia has recorded 26 successive monthly trade surpluses. The rolling annual surplus was $67.472 billion in the year to February.
• Exports of goods and services fell by 5 per cent (exports of goods fell by 3 per cent).
• Imports of goods and services fell by 4 per cent (goods imports fell by 5 per cent).
• Rural exports fell by 7 per cent. Exports of non-rural goods fell by 2 per cent. Gold exports fell by 23 per cent.
• Major moves: meat and meat preparations, down $134m (8 per cent); cereal grains and cereal preparations, down $102m (18 per cent); coal, coke and briquettes, up $183m (4 per cent); metals (excl. non-monetary gold), up $151m (15 per cent).
• Within imports, consumer imports fell by 8 per cent, capital goods imports dropped 7 per cent and intermediate goods imports fell by 2 per cent.
• A net services deficit of $705 million was posted in February following a surplus of $73 million in January.
• Australia’s annual exports to China fell from $150.08 billion to $149.19 billion in February. Exports to China are up 22.6 per cent on a year ago. Exports to China account for 38.42 per cent of Australia’s total exports.
• Australia’s annual imports from China eased from a record high of $78.89 billion to $77.38 billion in February. Annual imports were up by 1.2 per cent on a year ago. Imports from China still accounted for 25.4 per cent of Australia’s total imports.
• Australia’s rolling annual trade surplus with China rose from $71.19 billion to a record $71.81 billion in February.
Performance of Services – March
• The. AiGroup Performance of Services index fell from 47.0 points to an 11-year low of 38.7 points in March. The PSI has been below 50 for four straight months. A reading below 50 signifies contraction in activity.
• “Local responses to the global COVID-19 pandemic are already decimating large segments of the services sector. The Australian PSI® indicated stable conditions in finance & insurance but contractions in the five other sectors in March (trend). Restrictions on human movement and gatherings means closures for many businesses in hospitality, retail, transport, recreation, personal services, education and even community services. Businesses that remain open face falling sales and increasing operational restrictions.”
New motorcycle sales – March quarter
• “Data released today by the Federal Chamber of Automotive Industries (FCAI) revealed 17,977 motorcycles, all-terrain vehicles (ATVs) and scooters were sold during the first three months of 2020, compared with 18,438 for the same period in 2019. This represents a 2.5 per cent decline in the market.”
• “Across the industry segments, scooters suffered the biggest fall, with a 14.1 per cent decline in sales during the first quarter.”
• “Road bikes also suffered a significant 7.8 per cent decline over the quarter.” “Off-road motorcycles held their own with a 1.3 per cent sales increase.” “The ATV/SSV segment was the biggest positive for the industry with an overall increase of 8 per cent over the corresponding quarter last year.”
COVID-19: Survey of businesses by Australian Bureau of Statistics
• The ABS reported: “Two thirds (66 per cent) of Australian businesses reported that their turnover or cash flow had reduced as a result of COVID-19, according to results from the second Australian Bureau of Statistics (ABS) survey on Business Impacts of COVID-19.
• Nearly half (47 per cent) of businesses made changes to their workforce arrangements as a result of COVID-19. For some businesses this included temporarily reducing or increasing staff working hours, changing the location where staff worked (including working from home) or staff being placed on leave.
• Two in five businesses (38 per cent) have changed how they deliver their products or services, including shifting to online services. Over a third of businesses have renegotiated their lease and rental arrangements and a quarter have deferred loan repayments.”
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 monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
• The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.
• The Federal Chamber of Automotive Industries releases estimates of new motorcycle sales each quarter. The figures highlight the strength of consumer spending as well as conditions facing auto & components companies.
What are the implications for investors?
• Confidence will be the crucial ingredient to the recovery process. The good news is that governments and the Reserve Bank are making all the right moves. Aussies are also making the right moves – by staying at home – as ‘the curve’ (the number of active COVID-19 cases) is indeed flattening.
• Mounting stress in Australia’s services sector from the global virus crisis was apparent in the release of AiGroup’s services sector gauge today. Activity fell to 11-year lows in March due to sharp declines in sales and new orders as consumer demand weakened, restrictive social distancing measures implemented and businesses forced into hibernation as the pandemic escalated. Businesses that provide services to consumers like restaurants, taxis, hotels and tourism businesses will feel the pain for some time even if confidence levels improve.
Published by Ryan Felsman, Senior Economist, CommSec