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Consumer views on future finances hit 15½-month high

Biggest lift in new home sales in 20 years; Payrolls drop
Consumer confidence; New home sales; CBA card spending & spending intentions; Payrolls

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating fell by just 0.2 per cent to 108.7 (long-run average since 1990 is 112.6). But consumer views on family finances over the next year (‘future financial conditions’) rose by 2.4 per cent to a 15½-month high of 27.9 points.

New detached home sales: In seasonally adjusted terms, private new detached home sales rose by 91.8 per cent in December – the biggest lift since March 2001 – to 13,527 units. Sales were 48.7 per cent higher over the December quarter when compared to the September quarter and 99.5 per cent higher in December compared to a year ago. Sales surged by 32.5 per cent in calendar year 2020.

Commonwealth Bank (CBA) card spending: According to the Commonwealth Bank (CBA), credit and debit card spending in the week to January 15 lifted by 8.3 per cent on a year ago (previously: +13.1 per cent). Annual spending growth in Queensland dropped from 16.7 per cent to 4.2 per cent last week.

CBA Household Spending Intentions: According to CBA economists, “The Commonwealth Bank Household Spending Intentions series for December 2020 showed a welcomed improvement in Travel, Health & Fitness, Entertainment and Motor Vehicle spending intentions.”

Survey of payrolls & wages: The Bureau of Statistics (ABS) reported that between the week ending 19 December 2020 and the week ending 2 January 2021, national payroll jobs fell by 5.5 per cent (previous fortnight: -0.8 per cent) and wages decreased by 7.8 per cent (previous fortnight: +0.9 per cent).

The consumer confidence and card spending figures have implications for retailers, and other consumer-focussed businesses. The home sales data has implications for banks, retailers, developers, building and building material companies. The payroll and wage data helps government with decisions on assistance measures for households and businesses.

What does it all mean?

• Consumers are proving to be resilient despite encountering disrupted summer holiday plans due to localised Covid-19 lockdowns and interstate border closures. In fact, the ANZ-Roy Morgan Consumer Confidence index has edged just 0.3 points lower in early 2021. Sentiment is still 0.4 points higher than a year ago (January 19, 2020) when rampant bushfires dampened the mood of Aussie households. And consumer views on family finances over the next year (‘future financial conditions’) rose by 2.4 per cent to 27.9 points last week – the highest level since September 29, 2019.

• That said, consumers remain cautious as we begin the New Year. Commonwealth Bank (CBA) credit and debit card spending dropped sharply with the annual pace of spending decelerating from a growth rate of 18.6 per cent for the week ended December 25, 2020 to 8.3 per cent in the week to January 15, 2021. The hard 3-day virus lockdown in Greater Brisbane beginning January 8 saw card spending plunge by 12.5 percentage points to an annual growth rate of 4.2 per cent last week. Annual in-store spending in the Sunshine State dropped a whopping 17.7 percentage points to -0.5 per cent over the week. And virus flare ups in Greater Sydney and changing border restrictions saw spending down 3-4 percentage points across major states over the same week.

• The housing market finished 2020 with a bang, despite the pandemic recession. Home prices lifted, auction activity was robust, demand for home loans hit record highs and new home sales were the strongest in almost 20 years. The Housing Industry Association (HIA) today reported, “New Home Sales reached remarkable heights in December, nearly doubling compared to the number of sales recorded in November. This surge in sales can be attributed to HomeBuilder as households finalised contracts to build a new home before the 31 December 2020 deadline to access the $25,000 grant.”

What do the figures show?

Consumer sentiment – Week ended January 17

• The weekly ANZ-Roy Morgan consumer confidence rating fell by just 0.2 per cent to 108.7 (long-run average since 1990 is 112.6). Sentiment has fallen for three consecutive weeks after hitting a 13-month high of 111.2 on December 13, 2020. But confidence is still up by 66.5 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

New home sales – December

In seasonally adjusted terms, private new detached home sales rose by 91.8 per cent in December – the biggest lift since March 2001 – to 13,527 units. Sales were 48.7 per cent higher over the December quarter when compared to the September quarter and 99.5 per cent higher in December compared to a year ago. Sales surged by 32.5 per cent in calendar year 2020.

The Housing Industry Association (HIA) reported, “Across the country, new home sales in the December quarter were higher in all regions when compared with the same period in 2019: South Australia (188.3 per cent), Victoria (103.1 per cent), Queensland (99.9 per cent), Western Australia (99.2 per cent), and New South Wales (61.7 per cent).”

HIA said, “This month’s sample captures 20 per cent of Australia’s new detached home building sector.”

No data was published by the HIA for multi-unit sales.

The Commonwealth Bank (CBA) credit and debit card data – Week ended January 15

• According to the Commonwealth Bank (CBA), credit and debit card spending in the week to January 15, 2021 lifted by 8.3 per cent on a year ago (previously: +13.1 per cent) – the slowest pace of growth in 2½ months. Spending on services fell 0.8 per cent from a year ago (previously: +1.5 per cent). The annual growth rate of goods spending climbed 17.5 per cent (previously: +24.4 per cent).

• Online spending rose by 14.3 per cent from a year ago (previously: +20.4 per cent) with in-store spending up 6.7 per cent (previously: +11.5 per cent). Queensland in-store spending was down 0.5 per cent from a year ago after being up 17.2 per cent in the previous week.

• Over the week, the strongest annual card spending growth rate was in Tasmania (+14.2 per cent), followed by Western Australia (+13.6 per cent), Northern Territory (+12.3 per cent), South Australia (+11.9 per cent), Victoria (+8.8 per cent), NSW (+7.6 per cent), ACT (+6.7 per cent) and Queensland (+4.2 per cent).

The Commonwealth Bank (CBA) Household Spending Intentions Series (HSI) – December

• According to CBA Group economists, “The Household Spending Intentions (HSI) series for December 2020 showed that at the end of last year there was a very welcome improvement in spending intentions for Travel, Health & fitness, Entertainment and Motor Vehicles. Home buying and Retail spending intentions were flat on the month, following strong gains in November, with Education spending intentions also tracking sideways.”

• By component, the CBA reported:

• “After jumping higher in November, Home Buying spending intentions pulled back a little in December, but with the trend flat on the month.

• Following a strong rise in November, Retail spending intentions were a little lower in December, with the trend flat on the month.

• Travel spending intentions jumped solidly in December as state border restrictions were largely lifted.

• Health and fitness spending intentions rose in December, with actual spending activity stronger on the month even as Google searches declined.

• Entertainment spending intentions rose in December, driven higher by both actual spending and Google search activity.

• Education spending intentions were essentially flat in December, with an increase in the number of education related transactions offset by a decline in Google search activity.

• Motor vehicle spending intentions rose further in December, ending the year with solid momentum.”

Weekly payroll and wages – Week ending January 2

• According to the Australian Bureau of Statistics (ABS), in the period from December 19, 2020 to January 2, 2021, Australian payroll jobs fell by 5.5 per cent. National wages decreased by 7.8 per cent.

• Payrolls across state and territories from December 19, 2020 – January 2, 2021: NSW (-5.5 per cent); Victoria (-5.4 per cent); Queensland (-6.0 per cent); South Australia (-4.9 per cent); Western Australia (-5.3 per cent); Tasmania (-4.5 per cent); Northern Territory (-5.1 per cent); and the ACT (-6.1 per cent).

• Between the week ending 19 December, 2020 and the week ending 2 January, 2021 the largest changes across industry were:

• Payroll jobs: Construction payrolls fell by 12.4 per cent and both Agriculture, forestry and fishing and Administrative and support services payrolls decreased by 10.2 per cent.

• Total wages: Construction wages fell by 20.9 per cent and Administrative and support services wages decreased by 19.0 per cent.

• Employment size payroll jobs: Under 20 employees (-10.9 per cent); 20-199 employees (-6.7 per cent); 200 employees and over (-2.1 per cent).

• The ABS reported, “Australian labour market has a period of pronounced seasonality from December through to January due to: (i) increases in labour market activity before Christmas; and (ii) a combination of public holidays, school holidays and lower business activity (in many industries) in the period after Christmas.”

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 focus of the Commonwealth Bank (CBA) Household Spending Intentions Series (HSI) is on Australian households and their spending intentions. The approach is to employ the near real-time spending readings from CBA’s household transactions data, combine them with relevant search information from Google Trends data and map the results to the official data on consumer spending.

• The ABS data Weekly payroll jobs and wages “provides indicative information on the economic impact of the COVID-19 coronavirus on employees, including changes in employee jobs, changes in total wages, and changes in average weekly wages per job.”

• The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia’s largest 100 homebuilders. The survey covers around 15 per cent of the home building industry.

What are the implications for investors?

• A ‘war chest’ of savings, estimated to be around $100 billion, was amassed during the pandemic. Despite this, government-imposed lockdowns pose a threat to consumer spending and confidence until vaccines are rolled out. CBA Group internal card spending and Household Spending Intentions (HSI) data both show that customer spending pulled back in December. CBA Group economists are forecasting a 7.0 per cent drop in preliminary retail trade for December when the figures are released on Friday.

• Australian government statisticians do not seasonally adjust the weekly payrolls and wages data so weakness over the Christmas-New Year holiday likely reflects reduced seasonal hiring. Most Aussie businesses enforced shutdowns over the period with staff leave balances accumulating during the pandemic. Despite this, the ABS reported that payrolls jobs had increased back to pre-pandemic levels in early-to-mid December before a drop-off in hiring at year-end.

• With the ABS labour market survey taken in early December, CBA Group economists are expecting Victoria’s economic recovery to drive a 30,000 lift in the number of jobs in the month. The unemployment rate is forecast to ease from 6.8 per cent to 6.7 per cent when released on Thursday.

Published by Ryan Felsman, Senior Economist, CommSec