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Key reports point to recovery in consumer spending

Image of customers in LB2 cafe in Melbourne.
Image of customers in LB2 cafe in Melbourne.
Cafes like LB2 in Melbourne are recovering more quickly than pubs and bars, according to Zip’s Weekly Spending Index. (Source: Unsplash)

Household spending is starting to show signs of recovery, according to a new report from the Commonwealth Bank of Australia (CBA) that includes data to the end of May 2020.

Retail spending intentions jumped in May, driven by food, general retail (department and discount stores) and household furnishings and equipment. This is consistent with CBA’s weekly card spending data, which showed a 6 per cent increase in the week to June 12 compared to a year ago.

Entertainment spending intentions also improved in May, driven by an improvement in ‘recreation’ spending, although restaurants, cinemas, theatres and other venues are still seeing weak spending.

Home buying spending intentions also jumped in May, likely driven by falling house prices, while travel spending intentions stabilised, as domestic tourism started to seem more likely.

CBA’s monthly Household Spending Intentions (HSI) report is based on near real-time readings of household transaction data and relevant search information from Google Trends to provide a forward-looking analysis of consumer spending intentions.

The report covers seven key areas – home buying, retail, motor vehicle, entertainment, travel, education and health and fitness – which cover around 55 per cent of total consumer spend in Australia.

The HSI report is just the latest analysis to point to a recovery in consumer spending, a key factor for retail growth. ShopperTrak has reported steady growth in shopping centre foot traffic for the past six weeks, and the Westpac-Melbourne Institute Index of Consumer Sentiment returned to pre-COVID levels in May, after a weak April.

While Australia is still officially in a recession, the staged reopening of the economy and the implementation of fiscal support policies, such as JobSeeker and JobKeeper, appear to have given Australians the confidence to loosen their purse strings.

However, this also raises the risk of a relapse if the government’s fiscal support policies end before business fully stabilises.

“While we know that the Australian economy is in recession, the path to recovery is becoming clearer,” Stephen Halmarick, Commonwealth Bank’s chief economist, said in the HSI report.

Here are more recent reports showing signs of a recovery in retail spending.

Independent retailers see turnover increase

According to data from 13,962 independent retailers compiled by point-of-sale system Vend, turnover increased by an average of 45.3 per cent nationwide in May compared to April.

Retailers in all states, except the ACT, saw an increase in the month, with Western Australian retailers seeing the biggest jump of 65.8 per cent. The national average turnover in May was still 12.8 per cent lower than it was in February.

Recovery varies by sector

Zip’s Weekly Spending Index, which is based on granular transaction data from more than 1.8 million Australians, showed the first signs of a retail recovery in May, however, the different restrictions in each sector means this recovery is highly fractured across industries.

While hospitality overall is still struggling, restaurants and cafes are recovering quicker than pubs and bars. Spending in restaurants was down 19 per cent in May 2020 compared to April 2020, and down 39 per cent in cafes. Spending at pubs and bars was down 74 per cent in May 2020 compared to April 2020, nearly equal to the 79 per cent decline seen in April 2020 compared to March 2020.  

Sectors that saw a big increase in spending in May 2020, compared to May 2019, include security and safety system installation (up 133 per cent), surf schools (up 102 per cent), online marketplaces (up 89 per cent) and trade services (up 30 per cent).

Sectors that saw an increase in buy now pay later spending in May 2020, compared to May 2019, include cosmetics (up 103 per cent), jewellery (up 55 per cent), outdoor gear (up 47 per cent) and furniture and homewares (up 19 per cent).

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