Record lift in retail sales; Job ads slide
Retail trade; Skilled job vacancies; New home sales
Retail trade: ‘Preliminary’ retail trade rose by a record 8.2 per cent in March, after a 0.5 per cent gain in February.
Skilled job vacancies: In trend terms, the Internet Vacancy Index (IVI) fell 5.3 per cent in March (or 7,700 job advertisements). Over the year, job advertisements were down by 22.7 per cent (40,300). The IVI now stands at an all-time series low of 137,100.
New home sales: New home sales fell by 23.2 per cent in March.
Retail trade data is important for consumer-focussed companies. Skilled job vacancies is a leading indicator for the job market. The internet job vacancies data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies
What does it all mean?
• Been stocking up on toilet paper? You clearly weren’t alone. Consumers stockpiled food and supermarket groceries in March as they prepared to hunker down in their homes. Supermarket giants have previously noted that sales in each week in March were similar to that recorded ahead of Christmas. So while not unexpected, the surprise was that grocery sales were so strong to offset declines in spending at cafes, restaurants, clothing and shoe shops and department stores.
• Understandably sales have settled down in April to more ‘normal’ rates. And the Bureau of Statistics (ABS) did note that sales levelled off at the end of the month.
• It wasn’t just toilet paper, people fitted out their home offices with monitors, cables, office chairs and telco equipment all in demand. And no-doubt online spending was strong in the month.
• Looking ahead, fewer people working means more restrained spending. So it’s possible that we transition from record sales to a record decline in spending. Still, with people in their homes for longer and running out of things to do, ‘comfort’ spending and alcohol consumption will continue to support broader retail trade.
• Demand for workers dried up in March. Apart from grocery and delivery workers, few businesses would be taking on staff with widespread layoffs in hospitality and recreation sectors.
What do the figures show?
Retail trade – March
• ‘Preliminary’ retail trade rose by 8.2 per cent in March according to the ABS estimate. The lift in spending was the biggest gain ever recorded exceeding an increase of 8.1 per cent in June 2000 when households brought forward expenditure ahead of the GST implementation.
• Retail trade in March was up 9.8 per cent over the year.
The ABS reported:
• “The rise in seasonally adjusted terms in March 2020 was driven by the Food retailing industry with Supermarkets and grocery stores, Liquor retailing, and Other specialised food retailing all recording increases in demand. The Food industry rose 23.5 per cent ($2,710.4m) in March, with the Supermarket and grocery store subgroup rising 22.4 per cent ($2,180.8m).
• Analysis of supermarket and grocery store scanner data shows that monthly retail turnover for perishable groceries and all other groceries increased in original terms by 21.6 per cent and 35.6 per cent respectively in March compared to February.
• Monthly turnover doubled for products such as toilet and tissue paper, flour, rice and pasta between February and March. While monthly turnover for canned food, medicinal products and cleaning goods increased by more than 50 per cent. The rise in supermarket retail turnover reached a peak in mid-March before levelling off at the end of the month.
• Strength was also seen in other non-food sub-groups, for example, in the Electrical, Hardware and Other Retailing (not elsewhere classified or nec) sub-groups, where business reported an increase in sales of items related to the set-up of home offices for example.
• Weakness was seen in Cafes, restaurants and takeaway food services, Clothing, footwear and personal accessory retailing and Department stores. These industries recorded strong falls in turnover as a number of factors, including regulations regarding social distancing measures, limited the ability of businesses to trade as normal.”
Skilled Job Vacancies – March
• The Department of Employment Internet Vacancy Index (IVI) fell 5.3 per cent in trend terms in March (or 7700 job advertisements). Over the year, job advertisements were down by 22.7 per cent (40,300). The IVI now stands at an all-time series low of 137,100.
• Over the month, new job advertisements fell 22.3 per cent (35,300) in seasonally adjusted terms. This is the record monthly decline for the seasonally adjusted series, surpassing the 10.5 per cent (22,900) fall during the global financial crisis in January 2009.
• Job ads across states and territories in trend terms: NSW (down 4.8 per cent); Victoria (down 6.3 per cent); Queensland (down 4.0 per cent); South Australia (down 5 per cent); Western Australia (down 5.8 per cent); Tasmania (down 4.9 per cent); Northern Territory (down 3.0 per cent); and ACT (down 2.8 per cent).
According to the Department of Employment:
• “Job advertisements decreased in all eight broad occupational groups in March 2020. The strongest falls were recorded for Technicians and Trades Workers (down by 6.5 per cent), followed by Clerical and Administrative Workers (6.4 per cent) and Community and Personal Service Workers (5.3 per cent). Falls were also recorded in all occupational groups over the year to March 2020. The strongest falls, were recorded for Clerical and Administrative Workers (27.2 per cent), followed by Technicians and Trades Workers (25.5 per cent) and Managers (24.9 per cent).
• Job advertisements decreased in all states and territories in March 2020. The strongest falls were recorded in Victoria (down by 6.3 per cent), followed by Western Australia (5.8 per cent) and South Australia (5.0 per cent).
• Over the year to March 2020, all 48 detailed occupational groups recorded falls in job advertisements. The largest decrease was recorded for General-Inquiry Clerks, Call Centre Workers, and Receptionists (down by 3530 job advertisements), followed by Corporate Managers (2440), Business, Finance and Human Resource Professionals (2390) and Automotive and Engineering Trades Workers (1950).
• Medical Practitioners and Nurses was the only occupational group to record an increase in job advertisements (up by 70, in March 2020.”
• Over the year to March 2020, in three month moving average terms, job advertisements increased in five of the 37 IVI regions and remained steady in one.
• Increases were recorded in Gippsland VIC (up by 1.2 per cent), followed by Goldfields & Southern WA (1.1 per cent), Central Queensland and Fleurieu Peninsula & Murray Mallee SA (both up by 0.6 per cent), and Blue Mountains, Bathurst & Central West NSW (0.2 per cent).
• Job advertisements were unchanged in Yorke Peninsula & Clare Valley SA over the year to March 2020.
• The strongest decreases in job advertisements were recorded in Launceston and Northeast TAS (down by 33.4 per cent), followed by Hobart & Southeast TAS (27.0 per cent), Sydney (23.4 per cent), Ballarat & Central Highlands VIC (21.0 per cent), and Melbourne VIC (20.4 per cent).
New home sales – March
• According to the Housing Industry Association, new home sales fell 23.2 per cent in March. In the three months to March, sales rose 1.4 per cent.
• New house sales across mainland states: NSW (down 26.1 per cent); Victoria (down 16.9 per cent); Queensland (down 24.2 per cent); South Australia (down 21.1 per cent); Western Australia (down 31.6 per cent).
• “Across the country, private detached house sales in the March 2020 quarter were lower than in the previous three months in New South Wales (down 1.0 per cent) and Victoria (down 0.1 per cent). Detached house sales remained slightly higher than in the December 2019 quarter in Western Australia (up 5.8 per cent), Queensland (up 3.1 per cent) and South Australia (up 1.4 per cent).”
What is the importance of the economic data?
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The Department of Employment 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?
• The supermarket giants have been going gangbusters. And activity isn’t likely to slide with more people ensconced in their homes.
• With COVID-19 curves flattening across the nation, investor minds need to focus on the next stage. Construction, mining, education and utilities will lead businesses out of lockdown. There is likely to be a return to some recreation pursuits. Clothing stores will re-open. There will be an easing of restrictions on domestic tourism. Later down the track will be cafes, restaurants and pubs. And foreign tourism will be at the bottom of the list.
• But governments will hasten slowly. There is no rush – baby steps will be required with constant monitoring of daily case numbers and more and more testing.
Published byCraig James, Chief Economist, CommSec