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Record retail trade

Sydney consumer confidence falls most since July
Retail trade; Consumer confidence

Retail trade: ‘Preliminary’ retail trade rose by 7 per cent in November (consensus: +2 per cent) to be up 13.2 per cent on the year. Spending is up 13.9 per cent since February – before the widespread imposition of Covid-19 restrictions. In seasonally adjusted terms, total Aussie retail turnover hit a record high (since records began in April 1982) at $31,623.9 million in November.

Victorian re-opening boosts retail trade: Retail spending in Victoria rose by a record 21 per cent in November. And retail sales in the rest of Australia (excluding Victoria) lifted 2.7 per cent.

Consumer confidence: Last week the ANZ-Roy Morgan consumer confidence rating fell by 2 per cent from a 13-month high of 111.2 to 109.0 (long-run average since 1990 is 112.6). Sentiment is up by 66.9 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973) and is 13 points above the 2020 weekly average of 96.0. Confidence in Sydney fell by 5.3 per cent to 104.5 last week – the biggest drop since July.

Retail trade data is important for consumer-focussed companies. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.

What does it all mean?

• Victoria’s emergence from lockdown 2.0, bumper Black Friday sales and the release of the Apple iPhone 12 propelled total Aussie retail turnover to a record high (since records began in April 1982) of $31,623.9 million in November. Retail spending soared by 7 per cent in the month – the fourth biggest gain on record – well ahead of economists’ expectations for a 2 per cent lift in sales.

• Victorians – frustrated by a prolonged period stuck at home due to Covid-19 restrictions – returned to shopping malls in a big way. In fact, retail spending surged by a massive 21 per cent in November – the biggest monthly gain on record. The spending spree dwarfed the combined 2.7 per cent monthly lift in sales outside of Victoria.

• The Bureau of Statistics reported, “Household goods led the rises (up 13 per cent), impacted by a full month of trade in Victorian stores, a successful Black Friday sales period, and new product releases in the Electrical and electronic goods subgroup. Monthly rises were also significant in Clothing, footwear and personal accessory retailing, Department stores, other retailing, and Cafes, restaurants and takeaway food services.”

• But the growing cluster of Covid-19 cases and lockdown on Sydney’s Northern Beaches dented consumer confidence last week. The ANZ-Roy Morgan Consumer Confidence index fell by 2 per cent to 109 points after three successive weekly gains, which saw the index hit a 13-month high.

• Sentiment fell in Sydney by 5.3 per cent – the most since July – to 104.5 points (prior week: 110.4). Sentiment was down 2.1 points to 110.6 points in regional NSW on fears that coronavirus carriers may have visited areas outside of Australia’s most populous city.

• The virus flare up in Sydney saw an immediate reaction from state and territory leaders with border controls and quarantine measures imposed on travellers from metropolitan Sydney and surrounding areas. With interstate Christmas and New Year travel plans scuppered, consumer confidence also fell in Melbourne (down 3.9 points to 109.8 points), Brisbane (down 3 points to 110.1 points) and Adelaide (down 4.7 points to 108.3 points).

• Four of the five sub-indexes of the ANZ-Roy Morgan Consumer Confidence gauge fell last week. Consumer views on ‘current economic conditions’ (-4.6 per cent); ‘future economic conditions’ (-3 per cent); ‘current financial conditions’ (-2.2 per cent); and ‘time to buy a major household item’ (-1.4 per cent) all fell. But the ‘future financial conditions’ sub-index lifted by 0.9 per cent to 27.3 points – the highest level since mid-February.

 

What do the figures show?

‘Preliminary’ retail trade – November

• “Australian retail turnover rose 7.0 per cent in November 2020, seasonally adjusted, according to preliminary retail trade figures released today by the Australian Bureau of Statistics (ABS).

• Turnover rose 13.2 per cent when compared to November 2019.

• Ben James, Director of Quarterly Economy Wide Surveys, said: “Victoria saw a large rise, up 21 per cent, as retail stores experienced a full month of trade following the easing of coronavirus restrictions in that state. Excluding Victoria, retail sales rose 2.7 per cent.

• South Australia, which saw a short lockdown within November, had a flat result. Most South Australian retail industries saw falls as a result of temporary store closures, although these falls were offset by a rise in supermarket sales.”

• By industry, household goods retailing (13 per cent) led the rises, as Black Friday sales combined with major product releases in the electrical subgroup, led to a spike in turnover across the country.

• The rises in Victoria, and Black Friday purchases, also led to large national monthly rises in clothing, footwear and personal accessories, other retailing, and department stores.”

Consumer sentiment – Week ended December 20

• The weekly ANZ-Roy Morgan consumer confidence rating fell by 2 per cent from a 13-month high of 111.2 to 109.0 (long-run average since 1990 is 112.6). Sentiment is still up by 66.9 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973) and is 13 points above the 2020 weekly average of 96.0.

• According to ANZ economists, “In Sydney, confidence was down 5.3 per cent in its sharpest weekly drop since July. In the rest of New South Wales, it moderated by 1.9 per cent. Confidence weakened in Victoria (down 2.9 per cent), along with Queensland and Northern Territory.”

What is the importance of the economic data?

• The ABS now provides preliminary estimates for Australian retail turnover. “This estimate is compiled from the monthly Retail Business Survey and is based on preliminary data provided by businesses that make-up approximately 80 per cent of total retail turnover and is therefore subject to revision.”

• 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.

What are the implications for investors?

• Victorian virus ‘revenge spending’, the Apple iPhone 12 launch and blockbuster Black Friday sales were behind a massive surge in Aussie retail trade in November. Many Aussies now take advantage of late November Thanksgiving e-commerce and in-store sales to do their Christmas shopping. With the change in profile of retail spending, we may have seen another pull-forward of sales into November from the traditional December Christmas trading period.

• While the bumper November figures will be encouraging for retailers, the resurgence of new virus infection rates around Avalon on Sydney’s Northern Beaches will be of huge concern. Department stores and fashion outlets could see less foot traffic as consumers self-isolate across Greater Sydney.

• Consumer confidence has taken a knock nationwide as Covid-19 restrictions are re-imposed and state and territory borders are closed – ruining holiday and Christmas Day plans for many. But it is hoped that the Northern Beaches cluster can be contained and supressed due to the lockdown. The NSW Government today reported that just eight new Covid-19 cases were detected in the 24 hours to 8pm last night with a record 44,466 tests conducted.

• A short and sharp lockdown – as seen in South Australia during November – could be effective in stopping the virus spread to Greater Sydney and beyond. The brief period of economic shutdown in South Australia saw a flat rather than huge decline in retail spending in November. Of course, virus flare-ups will further accelerate the shift towards online spending on household goods, food and alcohol. The final retail trade numbers are due on January 11, 2021.
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Published by Ryan Felsman, Senior Economist, CommSec