Drop in consumer confidence worse than expected, says ANZ economist
Consumer confidence has dropped in the first week of January for the first time in more than 10 years and is now sitting nearly three points below what it was at the same time last year.
The ANZ-Roy Morgan Consumer Confidence dropped 2.4 pts to 106.0 during the first week of January, following a surge in cases of the omicron variant of COVID-19.
Over the past few weeks, tens of thousands of cases in NSW, Victoria, Queensland and South Australia have caused problems for businesses with staff forced to isolate due to catching COVID-19 or because of being a close contact. The surge in cases has likely contributed to the small decline in consumer confidence in the first week of January, a week in which consumer confidence normally increases to start the new year.
Consumer confidence this week was down in all states, particularly in South Australia (-11.8pts). Driving the decrease were negative movements in relation to current economic conditions and buying intentions going forward.
Nearly a third of Australians (down 2 ppts) still consider their families are “better off” financially than this time last year compared to 23 per cent (down 4ppts), who say their families are “worse off” financially, while 38 per cent (unchanged) expect their family to be “better off” financially this time next year, compared to 16 per cent (unchanged) who expect to be “worse off” financially.
Fewer Australians however, (14 per cent, down 5ppts), expect “good times” for the Australian economy over the next 12 months compared to 24 per cent (up 4ppts), who expect “bad times”.
In the longer-term, just over a fifth of Australians, 21 per cent (unchanged), are expecting “good times” for the economy over the next five years compared to 16 per cent (unchanged) expecting “bad times”.
Buying intentions decreased this week, with 38 per cent (down 3ppts) of Australians, saying now is a “good time to buy” major household items while 32 per cent (up 2ppts) say now is a “bad time to buy”.
ANZ head of Australian economics, David Plank, said confidence fell in all the major capitals, with Adelaide faring the worst.
“Over the decade from 2011 to 2020, consumer confidence has risen 2.6 per cent on average in the first survey of January compared to the last prior to Christmas. So, this result is even weaker than it seems,” he said.
“Consistent with the drop in confidence, ANZ-observed spending is at its lowest level since the Delta lockdowns. The good news is that people are still relatively happy about their own financial circumstances. This potentially sets things up for a rapid rebound once people are more confident about health outcomes.”
ANZ spending data showed that retail sales jumped 7.3 per cent m/m in November, driven by strong Black Friday sales and the reopening of Melbourne retail on 29 October, which pushed up Victorian retailing 20 per cent m/m.
Sales in the ACT also jumped 19.3 per cent m/m after severe lockdown impacts while NSW, which reopened its retail after delta lockdowns in mid-October, also rose 5.1 per cent m/m in November.
However, ANZ observed-spending shows that most of the post-delta gains for retail spending reversed in January due to staff shortages, households in isolation and caution about going out in public.
Australia’s trade surplus continued its recent decline, falling $1.8 billion to $9.4 billion (versus market expectations of $10.6 billion, and it is expected the trade surplus to narrow further as bulk commodity prices continue to normalise from the record highs seen last year.
A strong rise in imports of over 6 per cent m/m was the primary driver of the decline of the surplus. Imports rose across the board with intermediate and other merchandise goods contributing the most to the rise.
Exports also rose, partially offsetting the strong lift in imports. Rural goods saw the largest rise, up over 13 per cent m/m. With rural commodity prices up around 4.5 per cent m/m, it looks like a lot of this was volume driven.