Victoria dominates focus in new economic data
Consumer confidence; Weekly spending; Payrolls; Business survey
Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating fell by 0.5 per cent to a
9-week low of 91.6 (long-run average since 1990 is 112.8).
Spending: According to CBA, card spending in the week to July 10 was up 7.2 per cent on a year ago,
compared to a 12.1 per cent lift for the week ended July 3. The Kepler index of retail sales was up 2.4 per cent over the year to July 12.
Business confidence: The NAB business confidence index improved from -20.3 points to +1.5 points in
June (The long-term average is +5.2 points). Confidence had previously hit record lows of -65.4 in March.
Business conditions: The NAB business conditions index improved from -24.1 points to -7.5 points in
June. (The long-term average is +5.3 points). Conditions had previously hit record lows of -33.8 in March.
Survey of payrolls & wages: The Bureau of Statistics (ABS) reported that between the week ending March
14, 2020 and the week ending June 27, 2020 employee jobs decreased by 5.7 per cent. The payroll index is just below 12-week highs at 96.8. The wages index is just below 12-week highs at 94.3. The business survey has broad implications for investors and the economy. The payroll and wage data helps government with decisions on assistance measures for households and businesses. The consumer confidence and credit card spending figures have implications for retailers, and other consumer-focussed businesses.
What does it all mean?
The Aussie economy continues to gradually recover, but the new level 3 restrictions in Melbourne are serving to check momentum across the broader national economy.
Investors now have access to a wide range of timely data on spending. The CBA index of card spending provides a guide to economy-wide spending. And data from Kepler Analytics covers a number of retail metrics such as sales, average sales value and shopper traffic. Both reports show a recovery in sales from the lows to now be up modestly over the year. But last week Kepler noted that retail sales in Victoria were down by 33.6 per cent while sales were higher in all other states/territories except ACT (-0.3 per cent). Forty-three per cent of retail stores in Victoria were closed over the week to July 12 while only 9 per cent of NSW stores were closed.
The new lockdown restrictions in Melbourne, and concerns about hotspots emerging in NSW, weighed on
consumer sentiment in the past week. Consumers remain positive about the outlook for their own finances, and that shows up in the recovery in consumer spending outside Victoria.
Aussie consumers remain wary about spending on ‘big ticket’ items. The response to the question on whether it was a good time to buy a major household item was at an 8-week low.
Before the new lockdowns in Melbourne, businesses were regaining confidence and business conditions were improving. In fact, after cratering at a reading of minus 65 points, there are now more optimists than pessimists …just…with a reading of plus 1.5 points. The business survey results are encouraging, but as always it’s a case of baby steps. Business confidence has returned to pre-COVID levels and business conditions aren’t far behind.
Certainly – outside Melbourne – we must continue to move out of lockdown, but we also need to do all the right things: social distancing and follow COVID-safe procedures.
What do the reports and figures show?
Consumer sentiment – Week ended July 10
The weekly ANZ-Roy Morgan consumer confidence rating fell by 0.5 per cent to a 9-week low of 91.6 (longrun average since 1990 is 112.6). Sentiment fell for a third successive week, but is still up by over 40 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).
Three of the five major components of the index fell last week: The Commonwealth Bank (CBA) credit card data – Week ended July 10
According to the Commonwealth Bank (CBA), card spending in the week to July 10 was up 7.2 per cent on a year ago, compared to a 12.1 per cent lift for the week ended July 3. Online spending rose 6.3 per cent (previous week: +16.7 per cent) and in-store spending was up 8.5 per cent over the period (previous week: +9.9 per cent) Victorian spending is down 3.2 per cent on a year ago (previous week: +5.3 per cent), behind Tasmania which is up most (+16.4 per cent) and the Northern Territory (+16 per cent).
CBA noted: “Growth in spending on both goods and services fell over the week. The reimposition of
restrictions in some parts of Victoria is impacting the headline numbers.”
“Spending momentum in Victoria has turned negative as the number of COVID-19 cases lifts sharply and
restrictions are reimposed.”
“Spending on education has been weak across the country. Spending on food is growing at a similar pace
across all jurisdictions.” Kepler index of retail sales activity – Week ended July 12
The Kepler index of retail sales activity reported that aggregate sales fell 1.2 per cent last week to be up 2.4 per cent on the year. Average transaction value rose 2.7 per cent last week to be up 22.1 per cent on a year ago. Passer-by traffic fell 9.1 per cent last week to be down 35.6 per cent on the year.
National Australia Bank Business Survey – June
The NAB business confidence index improved from – 20.3 points to +1.5 points in June (The long-term
average is +5.2 points). Confidence had previously hit record lows of -65.4 in March.
The NAB business conditions index improved from – 24.1 points to -7.5 points in June. (The long-term
average is +5.3 points). Conditions had previously hit record lows of -33.8 in March.
The survey was conducted in the period June 24-30, 2020 across 400 firms.
The rolling annual average business confidence index fell from -11.7 points to -12.0 points. The rolling annual average business conditions index eased from -5.1 points to -6.2 points.
Key Components: The index of trading conditions rose from -19.0 points to -6.9 points; employment lifted from -34.4 points to -30.7 points; profitability increased from -19.4 points to -8.0 points; forward orders rose from -29.2 points to -9 points; stocks lifted from -9.4 points to -5.8 points; exporter’s sales increased from -37.3 points to -17.5 points.
Inflationary indicators: The monthly reading of labour costs fell at a rose at a 0.1 per cent quarterly rate in June after a 0.9 per cent fall in May. Purchase costs rose at a 0.7 per cent quarterly rate (previous month +0.3 per cent). Final product prices rose at a 0.2 per cent quarterly rate (previous month -0.3 per cent). Retail prices were up 1.2 per cent (previous month +0.1 per cent quarterly rate).
Capacity utilisation rose from 74.5 per cent to 76.7 per cent (81 per cent is the long-term average).
The proportion of firms reporting that they did not require credit rose from near 40 per cent to near 50 per cent.
NAB noted “Conditions rose across all industries – with mining and retail seeing the biggest increases. Outside of mining, retail now sees the best conditions followed by transport & utilities. The remaining industries remain notably weaker, with the services sectors still weakest. Manufacturing and construction also remain negative, highlighting an ongoing risk in these sectors from secondary spill-overs from the slowdown in economic activity.” Payroll and wages – Week ended June 27
The Australian Bureau of Statistics (ABS) has released the sixth edition of a new survey: “Weekly Payroll Jobs and Wages in Australia”.
The ABS reported, “Since the low in mid-April, total payroll jobs have increased by 3.3 per cent.” And “By the end of June, around 35 per cent of payroll jobs initially lost had been regained.”
Between the week ending 14 March 2020 (the week Australia recorded its 100th confirmed COVID-19 case) and the week ending 27 June 2020:
“Employee jobs decreased by 5.7 per cent; and
Total wages paid decreased by 3.2 per cent.”
Between the week ending 20 June 2020 and the week ending 27 June 2020:
Payroll jobs fell by 1.0 per cent and total wages paid fell by 0.7 per cent
Across states and territories from March 14 to June 27, employment changes were: NSW (-5.0 per cent);
Victoria (-6.6 per cent); Queensland (-5.2 per cent); South Australia (-5.5 per cent); Western Australia (-6.2 per cent); Tasmania (-5.9 per cent); Northern Territory (-5.7 per cent); and ACT (-6.3 per cent).
By industry, employee jobs fell most from March 14 to June 27 in Accommodation & food services (down
21.2 per cent) from Arts & recreation services (down 18.1 per cent). In the Financial and insurance services sector, jobs lifted by 0.9 per cent. Jobs also rose 1.4 per cent in Electricity, gas, water & waste services.
What is the importance of the economic data?
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.
The weekly Commonwealth Bank (CBA) credit & debit card spend data is derived from transaction
authorisations to give a near real-time view. This means that cancelled authorisations, refunds, reversals, etc. will not be included. Data has not been adjusted for effects of consumers substituting between cash and card payments. CBA merchant facility spend data is derived from the Merchant Acquiring System which includes net sales from both CBA and Other Financial Institution (OFI) domestic and international cards.
The monthly National Australia Bank business survey is valuable in providing a timely reading about the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
The ABS data Weekly payroll jobs and wages “provides indicative information on the economic impact of the COVID-19 coronavirus on employees, including changes in employee jobs, changes in total wages, and changes in average weekly wages per job.”
Kepler Analytics have “sensors in over 3500 locations globally, collecting traffic and other consumer behaviour data anonymously.” Kepler notes “Our clients provide us with their daily sales targets, actual POS sales and other specific data points on which they measure and manage their businesses. By aggregating and anonymising this information, we can provide unique insights into the Retail Industry as a whole.”
What are the implications for investors?
Retailers are again experiencing tough conditions in Victoria, although there are brighter conditions across the rest of the country. A great online sales experience will be vital for retailers with significant Victorian presence.
It is clear that the situation with COVID-19 case numbers is an evolving one. A fortnight ago there was growing optimism about the economy as a result of success in suppressing COVID-19 cases. That success meant that restrictions could be eased, although there were clear warnings about new cases emerging. Decisions to re-open the economy were correct but that creates the need for extra vigilance.
Concerns about deflation are abating. In the latest business survey, cost and price measures all rose in the latest month.
Published by Craig James, Chief Economist, CommSec