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‘Mortgager’ confidence hits decade high
Job ads reach 19-month highs; Home sales ease
Consumer Confidence; New home sales; Job ads

• Consumer confidence: The Westpac-Melbourne Institute Index of Consumer Confidence rose by 1.9 per cent in February to 109.1 – the second highest reading in seven years. The index is 14.2 per cent above its pre-pandemic level in February 2020 and up 44.3 per cent on the 29-year lows hit in April 2020 of 75.6 points. A reading above 100 points denotes optimism.

• Housing market confidence: The ‘mortgager’ confidence sub-index rose by 2.6 per cent to a decade-high of 113.4 in February. The ‘time to buy a dwelling’ index fell by 3.1 per cent to 120.7. And the ‘house price expectations’ index lifted 6.5 per cent to a 7-year high of 154.7.

• New detached home sales: In seasonally adjusted terms, private new detached home sales fell by 69.4 per cent in January to 4,143 units after soaring 91.8 per cent in December (the most in 20 years). Sales are down 12.1 per cent on a year ago, but are still a massive 82.4 per cent higher in the three months to January when compared to same period a year ago.

• Job ads lift: Job ads, as measured by SEEK, rose by 4 per cent in January to be up 6.5 per cent on the year. Yesterday the National Skills Commission reported that preliminary skilled internet vacancies lifted 1.6 per cent (or 2,800 advertisements) in January – the ninth consecutive monthly increase – to be up 11.1 per cent (or +17,500 ads) on the year. There were 175,135 skilled job vacancies at the end of January – a 19-month high.

The consumer confidence figures have implications for retailers, and other consumer-focussed businesses. Skilled vacancies highlights the strength of the job market and has implications for placement agencies and retailers. The home sales data has implications for banks, retailers, developers, building and building material companies.

What does it all mean?

• Consumer confidence in February was at the second highest level in seven years, behind the decade high set in December. The housing market and employment-related components of the Westpac-Melbourne Institute survey mostly improved following a slew of solid data releases over the past month. In fact, consumer views on ‘house price expectations’ lifted by 6.5 per cent to a 7-year high of 154.7. But the run-up in home prices may be impacting consumer views on housing affordability with the ‘time to buy a dwelling’ index down by 3.1 per cent to 120.7. That said, record low borrowing costs continue to boost the morale of those with a mortgage. The ‘mortgager’ confidence sub-index rose by 2.6 per cent to a decade high of 113.4 in February.

• The all-important Westpac-Melbourne Institute index of unemployment expectations reading was encouraging. In a sign that consumers are more confident about the post-pandemic labour market recovery, the index fell (improved) by 3.8 per cent in February to 114.5 – the second lowest reading in 9½ years.

• And why not? The latest data from the National Skills Commission confirms the bounce back in the job market. Vacancies hit a 19-month high of 175,135 advertised positions in January – 10.8 per cent higher than pre-pandemic levels in February 2020. During this period, the strongest recruitment activity has been in Western Australia (+30.8 per cent), Tasmania (+28.1 per cent), South Australia (+26.1 per cent), Northern Territory (+23.7 per cent) and Queensland (+17.5 per cent). But NSW (+2.9 per cent), Victoria (+5.4 per cent) and the ACT (+6.1 per cent) were the laggards.

• SEEK’s leading indicator of job growth also showed solid hiring intentions to begin 2021. In January, job ads lifted by 4 per cent to be up 6.5 per cent compared to a year ago. SEEK reported, “Traditionally, we would see a drop in new job ad growth throughout December, and into the start of January. Pleasingly, in 2021, businesses have been looking to hire from the very first week of the year.”

What do you need to know?

Consumer confidence – February

• The Westpac-Melbourne Institute Index of Consumer Confidence rose by 1.9 per cent in February to 109.1 – the second highest reading in seven years. The index is 14.2 per cent above its pre-pandemic level in February 2020 and up 44.3 per cent after hitting 29-year lows of 75.6 points in April, 2020. A reading above 100 points denotes optimism.

• The current conditions index fell by 0.1 per cent. But the expectations index rose by 3.2 per cent.

Of the remaining sub-components, the ‘time to buy a dwelling’ index fell by 3.1 per cent to 120.7. The ‘house price expectations’ index lifted 6.5 per cent to 7-year highs of 154.7. The ‘unemployment expectations’ index fell (improved) by 3.8 per cent to 114.5 – the second lowest reading in 9½ years.

New home sales – January

• In seasonally adjusted terms, private new detached home sales fell by 69.4 per cent in January to 4,143 units to be down 12.1 per cent on a year ago. Home sales had lifted by 91.8 per cent in December – the biggest lift in 20 years. And sales were still 82.4 per cent higher in the three months to January when compared to same period a year ago.

• The Housing Industry Association (HIA) reported, “New Home Sales reached remarkable heights in the December 2020 quarter, almost 100 per cent higher than at the same time the previous year. The impact of HomeBuilder is already being observed in record high housing finance results and approvals data and this will lead to strong jobs growth in the industry in 2021.”

• And, “New South Wales (+3.3 per cent) and South Australia (+34.1 per cent) both saw sales rise in January 2021 compared with 2020 while sales were lower than in the other states. Sales fell most significantly in Victoria (-27.5 per cent), Western Australia (-16.5 per cent) and Queensland (-9.5 per cent).”

• HIA said, “This month’s sample captures 23 per cent of Australia’s new detached home building sector.”

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

Job ads/vacancies – January

• Job ads, as measured by SEEK, rose by 4 per cent in January to be up 6.5 per cent on the year.

• Yesterday the National Skills Commission reported that preliminary skilled internet vacancies lifted 1.6 per cent (or 2,800 advertisements) in January – the ninth consecutive monthly increase – to be up 11.1 per cent (or +17,500 ads) on the year. There were 175,135 skilled job vacancies at the end of January.

• Skilled vacancies by state/territory in January: NSW (-1.2 per cent); Victoria (+1.8 per cent); Queensland (+ 2.4 per cent); South Australia (+0.1 per cent); Western Australia (+6.4 per cent); Tasmania (-3.8 per cent); Northern Territory (+0.9 per cent); ACT (+0.2 per cent).

What is the importance of the economic data?

• Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. 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. Confident consumers may be more inclined to spend, especially on major items.

• 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.

• The National Skills Commission releases a monthly Internet Vacancy Index. The index is based on a count of online job advertisements newly lodged on three main job boards (SEEK, CareerOne and Australian JobSearch) during the month. The index is the only publicly available source of detailed data for online vacancies, including around 350 occupations (at all skill levels), as well as for all states/territories and 37 regions.

What are the implications for investors?

• There are arguably three key pillars supporting Aussie consumer confidence: continued success in supressing the virus and the vaccine roll out; job creation; and rising home prices. Consumer views on economic conditions have improved across weekly and monthly surveys of sentiment. And certainly the ingredients are there for a decent economic rebound in 2021 with pent up demand a feature across several sectors of the economy.

• Despite recent virus flare ups, employers are getting on the ‘front foot’, positioning their businesses for the snap back in trading by actively recruiting skilled workers in the typically ‘quieter’ summer months. A business-led economic recovery featuring a lift in hiring and investment is crucial in the coming months. Could increased competition for workers finally erode some of that spare capacity in the labour market, thus boosting wages?

Published by Ryan Felsman, Senior Economist, CommSec