Early signs point to economic stabilisation and recovery
The ³Ô¹ÏÍøÕ¾ Tribune
The ³Ô¹ÏÍøÕ¾ Tribune
Business
16 Jun 2020 9:48 am AEST Date Time
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Latest data from CBA’s Global Economic and Markets Research team indicates a stabilisation and recovery is underway in household spending with some big changes in May.
The staged re-opening of the economy and the implementation of fiscal support policies are noticeably influencing household spending – according to the latest monthly , which includes data to the end of May 2020.
Commonwealth Bank Chief Economist Stephen Halmarick said: “We are seeing some big changes taking place in household spending that provide early signs of stabilisation and recovery in some parts of the Australian economy, largely driven by changes in government policy.
“ showed retail spending intentions jumped higher on the month, consistent with our CBA credit and debit card spending data. Improvement was also seen in entertainment spending intentions. After big falls in April, spending intentions stabilised for home buying and travel. Health and fitness spending intentions also stabilised after recent gains, while some weakness was evident for education spending intentions and motor vehicle spending intentions.
Mr Halmarick says home buying spending intentions stabilised in May due to an increase in mortgage applications as house prices fell. “This was especially the case for owner-occupiers looking to lock in low fixed rate mortgages. Online Google searches related to home buying decreased in previous months and is in line with house price falls for the month.”
Travel spending intentions also stabilised in May as parts of the economy re-opened. “While Australians may not be able to holiday overseas until well into 2021, domestic tourism is likely to get a significant boost in coming months. Australians will no doubt be keen to visit family and friends around the country and use the opportunity to explore the best that Australia has to offer,” Mr Halmarick said.
Looking at the jump in retail spending intentions in May, Mr Halmarick says the key drivers were food, general retail (department and discount stores) and household furnishings and equipment. “It is also worth noting that a larger share of retail sales is now likely flowing through credit/debit card spending, rather than by cash.”
Entertainment spending intentions also improved in May, with the key driver being an improvement in ‘recreation’ spending. “Perhaps adding to coronavirus ‘waist-lines’, there was also an ongoing increase in spending on both alcohol for at home consumption, and confectionary. Weakness is still evident in alcohol sales at licenced premises, as well as restaurants, art galleries, live music venues, bowling allies, cinemas and theatres.”
“While we know that the Australian economy is in recession, the path to recovery is becoming clearer”.
Monthly Household Spending Intentions
Each month, analysis by CBA’s Global Economic and Markets Research team provides an early indication of spending trends across seven key household sectors in Australia. In addition to home buying, the series covers around 55 per cent of Australia’s total consumer spend across; retail, travel, education, entertainment, motor vehicles, and health and fitness.
Retail Spending Intentions
Retail Spending Intentions jumped higher in May. This was consistent with the ongoing improvement in spending evident in the CBA credit/debit card spending data. Data to 12 June showed total spending up 6%/yr.
The key drivers for the Retail Spending Intentions in May were food, general retail (i.e. department & discount stores) and household furnishings and equipment.
It is also worth noting that a larger share of retail sales is now likely flowing through credit/debit card spending, rather than by cash.
Travel Spending Intentions
After collapsing in April as international travel was prohibited and inter-state travel was very difficult, Travel Spending Intentions stabilised in May as parts of the economy re-opened. This was especially the case for intra-state travel.
While Australians may not be able to holiday overseas until well into 2021, domestic tourism is likely to get a significant boost in coming months. Australians will no doubt be keen to visit family and friends around the country and use the opportunity to explore the best that Australia has to offer.
³Ô¹ÏÍøÕ¾ Buying Spending Intentions
³Ô¹ÏÍøÕ¾ Buying Spending Intentions stabilised in May – driven by an increase in mortgage applications as house prices fell. On-line searches related to home buying decreased in previous months.
Auction clearance rates have improved, although turnover remains low. The RBA’s substantial easing of monetary policy has seen mortgage rates fall to multi-generational lows – especially for fixed rate mortgages. CBA data has shown a large rise in new mortgage applications taking advantage of low fixed rates and this should help provide support to home buying in the future.
Education Spending Intentions
Education Spending Intentions were weak in May, with a rise in correspondence schools not enough to offset weakness across the other education sectors.
Sharp falls were seen in spending intentions for universities, colleges, schools, and trade and vocational.
With schools now back to on-campus learning and with a specific focus on trade and vocational learning as part of the Government’s economic recovery plans, the HSI should pick-up some improvement in coming months in this sector.
Entertainment Spending Intentions
Entertainment Spending Intentions improved in May – with the key driver being an improvement in ‘recreation’ spending, including on digital books and games, and music stores.
Perhaps adding to coronavirus ‘waist-lines’, there was also an ongoing increase in spending on both alcohol (for at home consumption) and confectionary.
Weakness is still evident in alcohol sales at licenced premises, as well as restaurants, art galleries, live music venues, bowling allies, cinemas and theatres.
Motor Vehicle Spending Intentions
The improvement in Motor Vehicle Spending Intentions that was evident in the second half of 2019 and into early 2020 has been reversed at the hands of coronavirus.
Spending intentions for motor vehicles declined further in May, with the weakness in the labour market, a turn down in house prices and general economy no doubt having an impact.
The softness in May was due to both reduced spending in this sector on the month and a downturn in on-line searches for motor vehicle shopping.
Health & Fitness Spending Intentions
After considerable strength in April, Health & Fitness Spending Intentions stabilised in May.
The key driver of the small downturn was reduced spending on medical care and health services – such as dentists, doctors, surgeons, hospitals, optometrists and podiatrists.
Fitness related spending remained solid, especially for bicycle shops and sporting goods stores. With gyms re-opening in mid-June and professional and community sport re-starting, some return to ‘normal’ spending patterns could be expected in this sector over coming months.
