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Consumer views on the economy hit 20-month high
Weekly consumer confidence; CBA Household Spending Intentions (HSI)

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating edged lower by 0.1 per cent from a 17-month high of 114.1 to 114.0 (long-run average since 1990 is 112.6). Confidence is up by 74.6 per cent since hitting record lows of 65.3 on March 29, 2020 (lowest since 1973).

Economic conditions: Consumer views on ‘current economic conditions’ lifted 2.0 per cent last week to a 20-month high of 8.2 points. And views on ‘future economic conditions’ rose 1.2 per cent to a 12-week high of 13.9 points.

CBA Household Spending Intentions (HSI): According to CBA economists, “The Commonwealth Bank Household Spending Intentions series for March 2021 showed improvement across five of the seven spending categories. March 2021 saw strong gains in spending intentions for Home Buying, Travel, Entertainment, Education and Motor vehicles. Health & fitness spending intentions consolidated recent gains, while Retail spending intentions were weak ‑ but this was largely a payback for the spike higher seen in March last year.”

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

What does it all mean?

• Consumer sentiment, as measured by ANZ and Roy Morgan, is a smidgen below 17-month highs. Economic data released last week was overwhelmingly positive with an expansion well under way despite headwinds from fading government stimulus and the stalling Covid-19 vaccine rollout. Australia’s jobless rate fell to 12-month lows in March; skilled internet job vacancies reached 12-year highs in March; house building commencements were near 21-year highs in the December quarter; the NAB business conditions index hit record levels in March; and the Westpac-Melbourne Institute’s measure of April consumer confidence was at the highest level since 2010.

• While not enough to lift the ANZ-Roy Morgan headline measure of consumer confidence last week, underlying views on the economy were more positive than the previous week. In fact, consumer views on ‘current economic conditions’ lifted 2.0 per cent last week to a 20-month high of 8.2 points. And views on ‘future economic conditions’ rose 1.2 per cent to a 12-week high of 13.9 points.

• Higher levels of mobility, lower mortgage repayments, strong jobs growth, elevated savings and rising asset prices, have all boosted consumer morale in recent weeks. And Aussie households appear in the mood to continue spending – a key support for the economic expansion. Last week the ANZ-Roy Morgan measure of whether it was a ‘good time to buy a major household item’ gained 1.4 per cent to a 14-week high of 19.7 points.

• And the Commonwealth Bank (CBA) Household Spending Intentions March report – using Google trends data – showed an improvement in spending intentions for key segments, such as home buying, travel, entertainment, education and motor vehicles.

What do you need to know?

Consumer sentiment – Week ended April 18

• The weekly ANZ-Roy Morgan consumer confidence rating edged lower by 0.1 per cent from a 17-month high of 114.1 to 114.0 (long-run average since 1990 is 112.6). Confidence is up by 74.6 per cent since hitting record lows of 65.3 on March 29, 2020 (lowest since 1973).

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

• According to CBA economists, “The Commonwealth Bank Household Spending Intentions series for March 2021 showed improvement across five of the seven spending categories. But, it should be noted that some of the annual percentage changes are now being distorted by the impact on spending from the onset of the Covid‑19 restrictions of a year ago.”

• And, “March 2021 saw strong gains in spending intentions for Home Buying, Travel, Entertainment, Education and Motor vehicles. Health & fitness spending intentions consolidated recent gains, while Retail spending intentions were weak ‑ but this was largely a payback for the spike higher seen in March last year.”

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 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.

What are the implications for investors?

• The preliminary reading on retail trade is scheduled tomorrow. Weekly Commonwealth Bank (CBA) credit and debit card spending data is pointing to a rebound in retail turnover in March after lockdowns were lifted in both Victoria and Western Australia. But the snap lockdown in Brisbane and widespread flooding in NSW could cap overall spending growth.

• CBA Group economists expect retail spending to lift by 0.8 per cent in March, but caution that we are likely to see the annual growth rate of sales drop sharply in the month due to base effects associated with the stockpiling of personal care and toiletry items in March last year ahead of the national lockdown.

Published by Ryan Felsman, Senior Economist, CommSec