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Economics | July 28, 2020

Lockdown blues: 5th weekly fall in sentiment Victorian jobs slide; Youth wages lift Consumer confidence; CBA card spending; Retail spending; Payrolls & wages

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating fell by 1.9 per cent to a 13-week low of 89.0 (long-run average since 1990 is 112.8). Sentiment fell for a fifth successive week, but is still up by 36.3 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

CBA card spending: According to the Commonwealth Bank (CBA), card spending in the week to July 24 was up 9.8 per cent on a year ago, compared to an 11.4 per cent lift for the week ended July 17. Online spending rose 20.4 per cent (previous week: +22.2 per cent) and in-store spending was up 5.7 per cent over the period (previous week: +7.4 per cent).

The Kepler index of retail sales activity reported that aggregate sales fell by 9.0 per cent last week (July 26), and sales were down 6.7 per cent on the year. Average transaction value rose 1.5 per cent last week to be up 27.9 per cent on a year ago.

Survey of payrolls & wages: The Bureau of Statistics (ABS) reported that between the week ending March 14, 2020 and the week ending July 11, 2020 employee jobs decreased by 5.6 per cent and total wages decreased by 4.8 per cent. Jobs fell most in Victoria (-7.3 per cent) across states and territories.

The consumer confidence and credit card spending figures have implications for retailers, and other consumer-focussed businesses. The payroll and wage data helps government with decisions on assistance measures for households and businesses

What does it all mean? Aussies have a bad case of the lockdown blues. While only Melbourne (and the Mitchell Shire) are in lockdown,

the rest of Australia feels the pain. Consumer confidence has now fallen for five straight weeks, posing challenges for consumer facing businesses.

There are two measures of consumer spending – all states and territories and all states and territories except Victoria. Still, Victorians are coping where they can by embracing online sites.

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Economic Insights. Lockdown blues: 5th weekly fall in sentiment

Yesterday, CommSec released the State of the States report. While Victoria was ranked second, we did note that the state was almost certain to slip down the leader-board as a result of the COVID-19 challenges. This observation is borne out by the latest estimates of retail spending and payroll jobs.

The ‘Stay at Home’ restrictions commenced for selected Melbourne postcodes on July 1 while ‘Stay at Home’ restrictions commenced for the broader metropolitan Melbourne and Mitchell Shire on July 8.

What do the reports and figures show?

Consumer sentiment – Week ended July 26

The weekly ANZ-Roy Morgan consumer confidence rating fell by 1.9 per cent to a 13-week low of 89.0 (long-run average since 1990 is 112.8). Sentiment fell for a fifth successive week, but is still up by 36.3 per cent since hitting record lows of 65.3 on March 29 (lowest since 1973).

All of the five major components of the index fell last week:

The Commonwealth Bank (CBA) credit card data – Week ended July 24

According to the Commonwealth Bank (CBA), credit and debit card spending in the week to July 24 was up 9.8 per cent on a year ago, compared to an 11.4 per cent lift for the week ended July 17. Online spending rose 20.4 per cent (previous week: up 22.2 per cent) and in-store spending was up 5.7 per cent over the period (previous week: up 7.4 per cent).

CBA noted: “Spending in the smaller states shows some week to week volatility, but remains roughly at the same level over recent weeks. The ACT is underperforming.

The impact of stage three lockdowns in Melbourne can be seen clearly in the deterioration in in-store spending in Victoria. NSW is also lagging WA and QLD, where there is no community transmission of Covid-19.

On-line spending in Victoria is rising sharply. This is partly being driven by university fees which are paid online. The semester dates have moved due to Covid-19. Online spending for retail items though has also risen.

NSW spending lags QLD and WA for transport, personal care and alcohol.”

Source: Kepler Analytics (week to July 26)

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Economic Insights. Lockdown blues: 5th weekly fall in sentiment

Kepler index of retail sales activity – Week ended July 26  

The Kepler index of retail sales activity reported that aggregate sales fell by 9.0 per cent last week (July 26), and sales were down 6.7 per cent on the year. Average transaction value rose 1.5 per cent last week to be up 27.9 per cent on a year ago. Passer-by traffic fell 9.5 per cent last week to be down 45.1 per cent on the year.

Sales rose in all state and territories on a year ago except Victoria where sales were down 56.1 per cent on a year ago. Forty-eight per cent of Victorian retail stores were closed in the past week compared with 20 per cent for all of Australia.

Payroll and wages – Week ended June 27

The Australian Bureau of Statistics (ABS) has released the seventh edition of a new survey: “Weekly Payroll Jobs and Wages in Australia”.

The ABS reported, “The latest data shows that around 35 per cent of lost payroll jobs had been regained by mid-July.”

Between the week ending 14 March 2020 (the week Australia recorded its 100th confirmed COVID-19 case) and the week ending 11 July 2020:

“Employee jobs decreased by 5.6 per cent; and

Total wages paid decreased by 4.8 per cent.”

Between the week ending 4 July 2020 and the week ending 11 July 2020:

Payroll jobs fell by 0.6 per cent and total wages paid fell by 1.9 per cent

Across states and territories from March 14 to July 11, employment changes were: NSW (-5.3 per cent); Victoria (-7.3 per cent); Queensland (-5.0 per cent); South Australia (-5.5 per cent); Western Australia (-3.1 per cent); Tasmania (-6.8 per cent); Northern Territory (-3.7 per cent); and ACT (-6.4 per cent).

By industry, employee jobs fell most from March 14 to July 11 in Accommodation & food services (down 18.1

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Economic Insights. Lockdown blues: 5th weekly fall in sentiment

per cent) from Arts & recreation services (down 16.3 per cent). In the Financial and insurance services sector, jobs lifted by 1.0 per cent. Jobs also rose 3.1 per cent in Electricity, gas, water & waste services.

Interestingly, wages fell most between 14 March and 11 July in Mining (-22.6 per cent), followed by Accommodation & food services (down 12.2 per cent).

Over the period 14 March and 11 July, jobs fell similarly for males (-5.8 per cent) and females (-5.5 per cent). And wages fell most for males (-6.6 per cent) than females (-2.4 per cent).

The ABS also reported for the period 14 March and 11 July,:

Payroll jobs: Those worked by people aged 70 and over decreased by 11.3 per cent and those worked by people aged 20-29 decreased by 7.9 per cent

Total wages: Payments to people aged under 20 increased by 19.1% and payments to people aged 40-49 decreased by 6.5%

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.

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.”

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.”

What are the implications for investors? The answer to all economic questions is COVID-19. Why is confidence down? COVID-19. Why is the gold price at

record highs? COVID-19. It is certainly clear from the latest data that the virus is the all-encompassing focus.

The softening of consumer confidence reflects a fear that more regions will face new lockdowns. Retailers must continue to put resources into their online sites.

Latest data shows that the fall in wages has hit those aged 40-49 years (and more broadly those aged 40-70) to a greater extent than younger Australians. While the changes have different implications for different retailers, the higher propensity to consume of young Australians is likely proving a key support for overall consumer spending.

Craig James, Chief Economist, CommSec Twitter: @CommSec