The Bull

Friday 19

October, 2018 8:44 PM



Consumer confidence gets a budget boost

Consumer confidence gets a budget boost

The weekly ANZ/Roy Morgan consumer confidence rating rose by 1.0 per cent to a 14-week high of 120.8.

Share |

15.05.2018 04:27 PM

Positive budget response; Record tourism
Consumer sentiment; Lending; Tourism; Reserve Bank; China data

Consumer sentiment: The weekly ANZ/Roy Morgan consumer confidence rating rose by 1.0 per cent to a 14-week high of 120.8. Confidence is up by 9.3 per cent over the year and above the average of 113.6 since 2014.

Tourism: Tourist arrivals rose by 2.6 per cent to a record-high of 771,600 in March. Departures rose by 4.1 per cent in March to a record high of 908,100.

Lending finance: Total new lending commitments (housing, personal, commercial and lease finance) fell by 1.8 per cent in March to $69.2 billion – the third fall in three months.

Reserve Bank Board minutes: The minutes from the May 1 Board meeting were issued. The Board’s neutral monetary policy stance remains intact with no change in the official cash rate likely for the foreseeable future.

Chinese data: Retail sales rose at a 9.4 per cent annual rate in the year to April (forecast: +10 per cent). Production rose by 7.0 per cent over the year (forecast 6.3 per cent). 

What does it all mean?

Consumers are in good spirits. And why not? Tax cuts, a stronger sharemarket, low interest rates and a more settled property market are all positives. The only negatives are the higher petrol price and lower Aussie dollar.

The Chinese economy continues to hum. But while retail sales growth out-performed in March, in April it was the turn of production to come up with a stronger-than-expected result. The second largest economy on the planet is recording annual production growth of 7 per cent with retail sales up 9.4 per cent over the year.

In March a record number of Aussies travelled abroad and a record number of tourists visited our shores. Clearly tourism and travel-dependent businesses – especially those focussed on air travel – are experiencing buoyant conditions. The latest data supports the positive earnings expectations of Qantas.

What do the figures show?
Chinese Economy

Chinese retail sales rose by 9.4 per cent in the year to April (forecast: +10 per cent), down from the 4-month high of 10.1 per cent in the year to March. In inflation-adjusted terms retail sales were up by 7.9 per cent over the year.

Annual retail growth rates were: cereals and oils, foodstuffs (up 8.0 per cent); beverages (up 10.4 per cent); tobacco and alcohol (up 9.5 per cent); medicines (up 8.2 per cent); garments (up 9.2 per cent); cosmetics (up 15.1 per cent); jewellery (up 5.9 per cent); personal care (up 12.0 per cent); home appliances (up 6.7 per cent); office supplies (up 18.3 per cent); furniture (up 8.1 per cent); telecom (up 10.8 per cent); oil products (up 13.3 per cent); cars (up 3.5 per cent); building materials (up 11.4 per cent).

Chinese industrial production rose by 7.0 per cent in the year to April (forecast +6.3 per cent), up from 6.0 per cent in the year to March. It was the second strongest growth in ten months.

Across industries, annual growth rates were: textiles (up 2.2 per cent); chemicals (up 5.2 per cent); non-metal minerals (up 1.9 per cent); ferrous metals (up 5.0 per cent); general equipment (up 9.7 per cent); transport equipment (up 2.9 per cent); machinery (up 9.0 per cent); communication (up 12.4 per cent); power equipment (up 8.3 per cent). Output of motor vehicles were up 10.8 per cent over the year with cars up 15.7 per cent.

Chinese crude output in April was down 2.3 per cent over the year to 15.51 million tonnes.

Chinese urban investment rose by 7.0 per cent annual in the four months to April on a year ago (forecast: +7.4 per cent), decelerating from 7.5 per cent in the three months to March. Annual growth of investment was the slowest in 19 years (since 1999).

Reserve Bank March Board minutes:

Last paragraph: “Taking into account the available information, the Board judged that holding the stance of monetary policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

Policy leaning: “In the current circumstances, members agreed that it was more likely that the next move in the cash rate would be up, rather than down. As progress in lowering unemployment and having inflation return to the midpoint of the target range was expected to be gradual, members also agreed that there was not a strong case for a near-term adjustment in monetary policy.”

Consumer Sentiment

The weekly ANZ/Roy Morgan consumer confidence rating rose for the fifth straight week, up by 1.0 per cent to a 14-week high of 120.8. Confidence is up by 9.3 per cent over the year and above the average of 113.6 since 2014.

Four of the five components of the index increased in the latest week:

* The estimate of family finances compared with a year ago was up from +7.1 to +7.9;
* The estimate of family finances over the next year was up from +25.3 to +27.1;
* Economic conditions over the next 12 months was up from +10.6 to +13.2;
* Economic conditions over the next 5 years was up from +13.3 to +17.5;
* The measure of whether it was a good time to buy a major household item was down from +41.9 to +38.1.

The measure of inflation expectations 2 years ahead eased from 4.4 per cent to 4.1 per cent.

Overseas arrivals & departures

Tourist arrivals rose by 2.6 per cent to a record high of 771,600 in March. Departures rose by 4.1 per cent in March to a record high of 908,100.

Arrivals are up 9.0 per cent on the year with departures up by 6 per cent.

In March, tourists from Greater China (China and Hong Kong) totalled 144,200 (mainland China 118,000; Hong Kong 26,200), ahead of New Zealand (116,000).

In March, tourist arrivals hit record highs from: France, Israel, Vanuatu, Vietnam, Sri Lanka and Argentina.

China is the largest source of tourists to Australia. Over the past year a record 1,409,200 tourists came to Australia from China, up by 12.5 per cent over the year. Tourists from New Zealand totalled 1,363,700 visitors over the past year, but were up just 0.9 per cent.

A record 319,500 Indian tourists travelled to Australia over the year to March, up by 18.1 per cent over the year.

Over the year to March, the number of US visitors rose by 9.2 per cent to a record high of 802,800 tourists.

Lending Finance

Total new lending commitments (housing, personal, commercial and lease finance) fell by 1.8 per cent in March to $69.2 billion – the third fall in three months. Commitments are down 6.1 per cent on the year.

In trend terms, lending fell for the second straight month, down by 0.2 per cent in March. 

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.

China’s National Bureau of Statistics releases its monthly economic statistics around mid month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.

The Australian Bureau of Statistics releases data on overseas arrivals and departures is produced monthly and is an indicator of the health of the tourism sector. The figures are also useful in understanding spending trends and tracking migrant numbers – an indicator with widespread implications for employment, housing and spending.

Lending Finance is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.

What are the implications for interest rates and investors?

CommSec expects official interest rates to be stable until late in 2018 or early 2019 with the latter seen as more likely.

Tourism remains a bright spot of the economy.

Consumers and businesses are still wary of taking on debt despite low interest rates.

Published by Craig James, Chief Economist, CommSec
Archive
Markets
Index: Points Change Percent

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright TheBull.com.au. All rights reserved.