Omicron dents consumer confidence. Record-breaking crop.

Consumer confidence; CBA card spending; ABARES report

The weekly ANZ-Roy Morgan consumer confidence rating fell by 1.3 per cent to 106.0.

Commonwealth Bank (CBA) national credit and debit card spending is 24.2 per cent higher for the week ending November 26, 2021 when compared to the corresponding week in 2019.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) today released a report estimating that the national winter crop production to reach a record 58.4 million tonnes in 2021/22.

What does it all mean?

• Consumer confidence, as measured by ANZ and Roy Morgan, fell by 1.3 per cent last week with the emergence of the new Omicron virus variant dampening sentiment. The Federal Government has delayed its planned re-opening of Australia’s international borders to foreign students and workers by a fortnight (now December 15). Already, multiple quarantined southern African cases of the virus mutation have been confirmed in Sydney.

• ANZ economists reported that, “Confidence rose in NSW and South Australia, while it dropped in Victoria, Queensland and Western Australia” last week. And four of the five key consumer sentiment sub-indexes fell, led lower by big falls in ‘future economic conditions’ (down 5.9 per cent – the biggest drop since April 2020) and ‘current financial conditions’ (down 3.8 per cent).

• That said, consumer views on whether it is a good ‘time to buy a major household item’ rose by 4.6 per cent to a 4½-month high of +16 points. Encouragingly for retailers, Aussie households appear more willing to spend, perhaps motivated by aggressive price discounting during last weekend’s Black Friday-Cyber Monday sales.

• The post-lockdown recovery in CBA credit and debit card spending data continues. CBA economists reported that the pace of consumer spending last week was back at levels last seen in May, prior to the winter Delta outbreaks, with a notable increase in spending on recreation.

• The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) today released a report estimating that the national winter crop harvest is forecast to reach a record high 58.4 million tonnes in 2021/22, up 6.6 per cent from the September estimate. Early spring rainfall boosted crop yields across Australia’s east coast, while harvests in South Australia and Western Australia were boosted by heavy rainfall and milder temperatures in October.

• ABARES also raised its forecast for Australia’s wheat crop to 34.4 million tonnes, up 5.5 per cent from its estimate of 32.6 million tons in September. But the agriculture forecaster warned that recent heavy rains and floods in NSW and Queensland could reduce the quality of the crops.

• The government’s estimate for canola production was increased by 14 per cent to a record 5.7 million tonnes, boosting supplies to a global market trading near all-time highs for prices because of crop failures in Canada.

What do you need to know?

Consumer sentiment – Week ended November 28

• The weekly ANZ-Roy Morgan consumer confidence rating fell by 1.3 per cent to 106.0 (long-run average since 1990 is 112.4). Four out of the five major sub-components fell last week.

CBA card spending data – Week ended November 26

• CBA economists said, “The latest CBA data for the week ending 26 November indicates that the pace of consumer spending across the nation continues to remain steady at a fairly solid level. Card spending was 24.2 per cent higher than the corresponding week in 2019. That is 1 percentage point higher than where it was a fortnight ago and a similar pace to what was being recorded in May, just prior to the delta outbreak.”

• By category: “Over the past fortnight spending lifted on food and alcohol services and personal care. The category that has materially shifted higher since restrictions were eased has been recreation. Card spending on recreation was 29.5 per cent above 2019 levels for the week ending 26 November and the strongest pace this year by far. Pent up demand for travel and recreation activities has seen a lift in this category as more state borders have been reopened or committed to reopen shortly. The emergence of the new variant, Omicron, is being watched closely. Details around this variant and any possible new restrictions will be watched closely over coming days.”

• By region: “Spending in NSW and Victoria lifted slightly over the past fortnight to be 24.2 per cent and 22.6 per cent compared to 2019 levels. Recreation spend in NSW and Victoria shifted higher. Card spending in other states and territories has also risen in the past fortnight and remains the strongest in Western Australia (+29.3 per cent), South Australia (+25.9 per cent) and Queensland (+25.8 per cent). The Northern Territory has regained its prior spending pace after a snap lockdown impacted the data a fortnight ago.”

Published by Ryan Felsman, Senior Economist, CommSec