Luxury vehicle sales lift; Airfares fall again
Aussies reluctant to buy goods from overseas
Airfares; Credit/debit cards; Luxury cars

Luxury vehicle sales: The CommSec index of luxury marques rose again in August, up by 0.6 per cent. Previously in July – and for the first time in two years – rolling annual luxury vehicle sales rose (lifting 0.4 per cent) coinciding with a lift in home prices.

Domestic airfares: Airfares can be volatile on a month-to-month basis. But smoothed measures show that business and discount airfares are falling at the fastest annual rate in 6½-7 years.

Credit cards: The average credit card balance hit a six-month low of $3,187.46 in July. Overseas purchases represented 6.1 per cent of all credit card purchases in July.

Card purchases: Credit & charge card purchases fell by 0.4 per cent in July while debit card purchases rose by 1.9 per cent.

The vehicle sales data provides guidance on consumer spending as well as conditions for the Autos and Components sector of the sharemarket. Credit card data is important for the retail and financial sectors. The airfares data provides a guide on inflationary pressures as well as giving an insight into operating conditions for airlines.

What does it all mean?

• In the past, there have been close links between luxury vehicle sales and home prices. That link remains close. For the past two months, annual sales of luxury vehicles have risen. And the gains have coincided with a lift in home prices. In the past, movements at the top-end of the new vehicle and housing markets have led gains in the broader markets of the two assets.

• Airlines are still finding hard to fill planes. As a result, they have resorted to discounting. Smoothed measures of airfares for both discount and business class seats are falling at the fastest pace in almost seven years.

• Aussie consumers are seemingly happy with holding a credit card balance of around $3,000. The average balance hit that level around 12 years ago and it has held $3,000-$3,500 in the period since.

• Similarly, spending on overseas purchases. Overseas purchases hit 6 per cent of all purchases six years ago. And in the period since the share has held 6.0-6.5 per cent. Aussie retailers can feel a little more comfortable that they are not continuing to lose market share to offshore businesses.

What do the figures show?
Domestic airfares

• Business class airfares rose by 15.6 per cent in September after falling by 13 per cent in August. Business class airfares are down 8.8 per cent on a year ago. In smoothed terms, business class airfares fell by 1.1 per cent in September to be down 14.3 per cent on the year – falling at the fastest annual rate in 6½ years.

• Discount airfares are volatile month-to-month. In September, fares rose by 17.6 per cent after falling 10.1 per cent in the two previous months. Discount airfares are down 4.5 per cent over the year to September. In smoothed terms, discount airfares rose 0.2 per cent in September but were down 8.2 per cent on the year – the biggest annual fall in seven years.

• Restricted economy airfares rose by 0.6 per cent in September. In smoothed terms, restricted economy fares were up 0.1 per cent in September to be up by 3.5 per cent on the year.

Credit and debit card lending

• The number of credit and charge card purchases rose 0.3 per cent in July (up 3.8 per cent annual) while the value of purchases fell 0.4 per cent (up 0.7 per cent annual).

• The value of overseas purchases made with credit and charge cards in July was 4.0 per cent lower than a year ago. But the value of domestic purchases was up 1.3 per cent on the year.

• Overseas purchases represent 6.12 per cent of all purchases.

• The value of credit and charge card cash advances fell by 0.7 per cent in July to fresh 21-year lows of $594.7 million.

• The number of credit and charge card accounts stood at a near 5-year low in July (lowest since November 2014), down from 15.77 million to 15.70 million in July.

• Credit and charge cards on issue stood at 20.89 million in July with credit cards at 19.36 million and charge cards totalling 1.54 million.

• The number of debit card accounts rose by 0.8 per cent in July to 38.8 million. Accounts are up 5.1 per cent on the year

CommSec Luxury Vehicle index

• To get a gauge on the luxury vehicle market, CommSec tracks the sales of 17 luxury marques: Aston Martin, Audi, BMW, Bentley, Ferrari, Hummer, Jaguar, Lamborghini, Lexus, Lotus, McLaren, Maserati, Maybach, Mercedes-Benz, Morgan, Porsche and Rolls Royce.

• Sales of luxury marques hit peak levels of 106,658 units in the year to December 2016. And in the period to June 2019, rolling annual luxury vehicle sales fell by 19.7 per cent, hitting 4-year lows. But in July 2019, rolling annual sales lifted for the first time in two years. And the rolling annual measure rose again in August.

• In August the annual total of luxury vehicle sales rose by 0.6 per cent to 86,124 vehicles. Sales had risen 0.4 per cent in July.

• Annual sales of Bentley, Ferrari and Rolls Royce vehicles were all at record levels in the year to August.

What is the importance of the economic data?

• 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.

• The Federal Chamber of Automotive Industries releases estimates of vehicle sales on the third business day of the month. The figures highlight the strength of consumer spending as well as conditions facing auto & components companies.

• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases data on domestic and international aviation each month. The data is useful in tracking consumer spending and airline performance as well as broader economic activity.

What are the implications for interest rates and investors?

• If an Aussie consumer buys something, it’s more likely that it will be with a card nowadays rather than cash. So the monthly data on credit and debit card spending is super-important.

• It is clear from the current data that consumers are cautious about spending. Smoothed annual growth is the slowest in more than a decade, reflecting lower price growth and subdued demand for goods and services.

• Airlines are still trimming airfares. To get a handle on the sector, data on passenger numbers and airfares are worth monitoring closely.

• Luxury car sales are lifting and so are home prices. It is early days in the upturn, but the trends are positive.

• The Reserve Bank is tipped to cut the cash rate in November. Today’s data supports that view.

Craig James, Chief Economist, CommSec