Consumer views on economy hit 19-month high
Consumer confidence; Credit/debit cards

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.5 per cent to 111.9 points (long-run average since 1990 is 112.6). Confidence is up by 71.4 per cent since hitting record lows of 65.3 on March 29, 2020 (lowest since 1973). Consumer views on ‘current economic conditions’ rose 3.6 per cent to a 19-month high of 5.3 points.

Commonwealth Bank card spending: According to the Commonwealth Bank (CBA), credit and debit card spending in the week to March 5 lifted by 10.8 per cent on a year ago (previously: +10.4 per cent). Spending on services rose 11.9 per cent from a year ago (previously: +4.3 per cent). The annual growth rate of goods spending lifted 9.8 per cent (previously: +17.0 per cent).

Credit card debt: According to the Reserve Bank, the average credit/charge card balance fell by $122.24 or 4.2 per cent to $2,813.32 in January – the biggest fall for a January month in 27 years of records.

The consumer confidence figures have implications for retailers, and other consumer-focussed businesses. The credit & debit card spending data provides guidance for consumer-focussed businesses.

What does it all mean?

• Aussie households are feeling more chipper about the economic outlook, supported by record-low borrowing costs, government stimulus payments and an improving job market. After the deep pandemic recession, the December quarter national accounts – released last week – showed Australia enjoyed the strongest six-month period of economic growth (as measured by GDP) since records began in 1959. The ANZ-Roy Morgan measure of consumer views on ‘current economic conditions’ jumped 3.6 per cent to 5.3 points last week – the highest level since July 28, 2019. And opinions on ‘future economic conditions’ lifted 2.1 per cent to 12.9 points.

• Commonwealth Bank (CBA) household credit and debit card spending rose by 10.8 per cent last week compared to a year ago. CBA Group economists reported that spending on some essential items are beginning to ‘normalise’ after stockpiling ahead of last year’s national Covid-19 lockdown. In fact, annual spending on food from grocery stores and supermarkets dropped 2.9 per cent last week when compared with a year ago. But the roll-out of vaccines, easing of social distancing measures and better mobility boosted spending on services (+11.9 per cent) and recreational activities (+15.4 per cent) last week from a year ago.

What do you need to know?

Consumer sentiment – Week ended March 7

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.5 per cent to 111.9 (long-run average since 1990 is 112.6). Confidence is up by 71.4 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 March 5

• According to the Commonwealth Bank (CBA), credit and debit card spending in the week to March 5 lifted by 10.8 per cent on a year ago (previously: +10.4 per cent). Spending on services rose 11.9 per cent from a year ago (previously: +4.3 per cent). The annual growth rate of goods spending lifted 9.8 per cent (previously: +17.0 per cent).

• Over the week, the strongest annual card spending growth rate was in Northern Territory (+19.1 per cent), followed by Western Australia (+15.0 per cent), Tasmania (+14.7 per cent), South Australia (+14.3 per cent), Queensland (+11.9 per cent), NSW (+9.9 per cent), Victoria (+9.3 per cent) and the ACT (+5.8 per cent).

Credit and debit card lending – January

• The average credit/charge card balance fell by $122.24 or 4.2 per cent to $2,813.32 in January. And the average limit fell by $3.19 or less than 0.1 per cent to $9,847.40.

• The number of credit and charge card purchases rose by 1.8 per cent in seasonally adjusted terms in January to be up 2.9 per cent on the year. The value of purchases made with credit and charge cards fell by 1.5 per cent in January to be down by 7.6 per cent on a year ago.

• The number of overseas purchases fell by 9.6 per cent in January to be down 49.5 per cent on the year. The value of overseas purchases fell by 18.5 per cent in January to be down 64.8 per cent on the year.

• The number of debit card purchases fell by 0.5 per cent in January but was up 13.7 per cent on the year. The value of debit card purchases fell by 0.9 per cent but was up 16.8 per cent on the year.

• By value, the sum of credit & debit card purchases fell by 1.1 per cent in January. Card purchases were up 4.9 cent on the year. Smoothed annual growth (12-month average) eased from 1.0 per cent to 0.8 per cent.

• The number of credit and charge card accounts stood at a 13½-year low of 13.55 million in January, down from 13.63 million in December. Accounts are down 7.4 per cent on the year.

• The number of debit card accounts rose by 0.4 per cent to 35.05 million in January. Accounts are up 3.5 per cent on the year.

• The number and value of ATM transactions continues to fall. The number of ATM withdrawals in January was down by 21.1 per cent on the year with the value down by 12.9 per cent.

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.

• The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.

What are the implications for investors?

• Consumer confidence has rebounded, but figures released by the Reserve Bank yesterday showed Aussies continuing to use savings amassed during the pandemic to pay down credit card debt. Why? The average interest rate on credit cards is around 17.5 per cent using bank-compiled data. In January, the average credit/charge card balance fell by $122.24 or 4.2 per cent to $2,813.32 – the biggest fall for a January month in 27 years of records. And the value of purchases made with credit and charge cards fell by 1.5 per cent in January to be down by 7.6 per cent on a year ago.

• A larger proportion of Australians now prefer to use debit cards to help control their finances and for health reasons during the pandemic – with ‘tap and go’ purchases more readily available at stores. Over the year to January, the number of debit card purchases lifted 13.7 per cent and the value of debit card purchases were up 16.8 per cent. Debit card accounts now total 35.05 million.

Published by Ryan Felsman, Senior Economist, CommSec