Spending and consumer confidence slumping

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Spending and consumer confidence slumping

Summary

  • BHP reports $9.4b in earnings, lower than expectations
  • Seven West Media earnings falling
  • Consumer spending at 2 year lows
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Australian consumer confidence slumped to a five-month low last week, driven by increased pessimism towards the outlook for the domestic economy. The ANZ-Roy Morgan consumer confidence Index fell 2.3 per cent to 112.8, leaving it at the lowest level since late March.

"Australian households appear to be troubled by negative global economic developments and the related equity market weakness, with sentiment toward current and future economic conditions down sharply," David Plank, ANZ Bank's head of Australian economics, said in a note accompanying the latest update.

"Views about current economic conditions have fallen materially for three weeks in a row, while those for future economic conditions are at their weakest since October/November last year."

The latest survey was conducted over August 20 to 21, just after the S&P/ASX 200 suffered its largest decline since February 2018 on Thursday as fears over a possible US recession intensified. While sentiment towards the economic outlook deteriorated sharply, views towards family finances rose slightly over the same period, helping to cushion the fall in the headline index.

"The relative buoyancy of sentiment about personal financial conditions indicates that the tax cuts and lower interest rates are having a positive impact on households, but this hasn't been sufficient to offset the global news flow," Mr Plank said.

by David Scutt

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Spending across the Australian economy fell for a second consecutive month in July, according to new data released by the Commonwealth Bank on Tuesday. The bank's Business Sales Indicator (BSI) – a measure that tracks the value of electronic transactions processed through its merchant facilities – fell by 0.1 per cent last month in trend terms after declining by a similar margin in June.

"The monthly movements in spending in the past few months are around the weakest in around 2½ years," said Craig James, chief economist at Commsec, in a note accompanying the latest report.

While only early days, the weakness casts doubt as to whether recent interest rate cuts and income tax relief will encourage households and businesses to boost their spending levels.

"Perhaps Aussie taxpayers are waiting for their tax returns to be processed," Mr James said.

The weakness in July was driven by steep falls in New South Wales and Victoria, Australia's most populous states, with the value of sales declining 0.6 and 0.3 per cent respectively from a month earlier in trend terms. Sales in all other states and territories rose over the same period, led by a 0.9 per cent lift in the Northern Territory.

Spending on amusement and entertainment, in retail stores and on automobiles and vehicles slumped by 1.4, 1.1 and 0.9 per cent respectively in trend terms, the bank said. The declines in June and July saw the annual pace of sales slow to 3.2 per cent in trend terms, down from 3.8 per cent in the year to June and well below the series long-run average of 5.5 per cent. The BSI measures changes in nominal spending patterns on both goods and services.

Given the impact of inflation, population growth and the continued shift away from cash to electronic payment methods, the 3.2 per cent increase in the BSI points to continued sluggishness in per capita spending. While only the value of transactions processed trough Commonwealth Bank merchant facilities, the results are likely to be broadly representative of spending patterns across the country given the CBA is the largest retail bank in Australia.

by David Scutt

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IG MARKETS SPONSORED POST

ASX futures up 12 points or 0.2% to 6440 near 7.20am AEST

AUD -0.2% to 67.65 US cents
On Wall St: Dow +1% S&P 500 +1.2% Nasdaq +1.4%
In New York: BHP +0.7% Rio +0.6% Atlassian -0.9%
In Europe: Stoxx 50 +1.2% FTSE +1% CAC +1.3% DAX +1.3%
Spot gold -1% to $US1499.19 an ounce near 2pm New York time
Brent crude +1.6% to $US59.56 a barrel
US oil +2% to $US55.94 a barrel
Iron ore -1.3% to $US88.40 a tonne
Dalian iron ore -0.5% to 619.5 yuan
LME aluminium +0.1% to $US1794 a tonne
LME copper +0.5% to $US5774 a tonne
2-year yield: US 1.55% Australia 0.73%
5-year yield: US 1.48% Australia 0.67%
10-year yield: US 1.60% Australia 0.91% Germany -0.65$
10-year US/Australia yield gap near 6.30am AEST: 69 basis points

IG MARKETS SPONSORED POST

The panic that's defined trade in global markets in the past few weeks continued to subside overnight. Risk and growth sensitive assets are rallying, and safe-havens are falling, as a series of sentiment-soothing news stories settle the nerves of market participants. The VIX dropped once again during Wall Street trade, to around 16, coming closer to the point that suggests fear is becoming contained in the financial markets. As a consequence, stock markets have climbed across the globe, with the S&P500 rallying 1.20 per cent last night. Global bond yields are creeping higher. The Yen is pulling back, as is gold. And oil prices have jumped.

Nothing has quantifiably changed in market fundamentals yet. But a handful of stories is supporting the notion that policymakers will be throwing their weight together to arrest a global economic slowdown. Belief remains that central bankers will cut interest rates aggressively in coming months. The US and China are playing nicer with one another in the last few days. And there are signs that the typically-austere German government is preparing a big stimulus-package to combat a looming German-recession. One might argue the markets reaction to these stories is a triumph of hope over reason. Nevertheless, they've proven enough to see a slight arrest in downside momentum in global stock markets. The ASX ought to edge higher this morning courtesy of Wall Street's lead.

Good morning and welcome to today's Markets Live blog.

Your editor today is Lucy Battersby (lbattersby@theage.com.au) and David Scutt.

This blog is not intended as financial advice.

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