Spending intentions at 5-month high

Consumer confidence; Chinese trade

• Consumer confidence rises: The weekly ANZ/Roy Morgan consumer confidence rating rose by 0.3 per cent in the week to January 11 to a 4-week high of 112.0, above the 2014 average of 111.3.
• Spending intention: The question asking whether it was a good time to buy a major household item was up from +35 to +39 (highest in five months – highest since August 3 2014).
• China data: The trade surplus narrowed from US$54.47 billion to US$49.1bn in December. Exports were up 9.9 per cent over the year (forecast +6.8 per cent) with imports down 2.3 per cent (forecast 7.4 per cent decline).

What does it all mean?

• Confidence can be a nebulous concept. Over 2014, consumer confidence was flat at best, but retail spending grew at an above-average pace, and in December car sales were at record levels for a December month. So the fact that confidence only rose slightly last week means little. Terror attacks in Sydney and Paris in recent weeks no doubt have had an influence on confidence levels. And while Aussie motorists are happy with lower petrol prices, consumers more generally are not overjoyed that the Aussie dollar has weakened. A softer Aussie means less value for Aussie tourists on overseas jaunts and the weaker currency also reduces interest in buying goods on overseas internet sites.
• Overall, confidence levels are OK. Encouragingly for department store retailers and car dealers, the response to the consumer sentiment question asking whether it was a good time to buy a major household item, rose even further in the latest week to the highest levels in five months.
• Further falls in petrol prices should continue to support consumer confidence levels and at the same time puts extra spending power in people’s pockets. The average household is $46 better off per month compared with a year ago, courtesy of lower petrol prices.
• The Chinese trade data is clearly encouraging. Export growth was stronger than expected with imports falling by less than expected. The data implies that Chinese businesses are selling more overseas while domestic conditions are also improving with purchases from overseas not falling as much as expected.

What do the figures show?

Consumer sentiment:

• The ANZ/Roy Morgan consumer confidence rating rose by 0.3 per cent in the week to January 11 to a 4-week high of 112.0, above the 2014 average of 111.3.
• Three of the five components of the index rose in the latest week:
• The estimate of family finances compared with a year ago was down from +8 to +5;
• The estimate of family finances over the next year was up from +19 to +20;
• Economic conditions over the next 12 months was up from -11 to -9;
• Economic conditions over the next 5 years was down from +8 to +5;
• The measure on whether it was a good time to buy a major household item was up from +35 to +39 (highest in five months – since August 3 2014).

Chinese data

• The trade surplus narrowed from US$54.47 billion in November to US$49.10 billion in December. Exports were up 9.9 per cent over the year (forecast: +6.8 per cent; November: +4.7 per cent) while imports were down by 2.3 per cent (forecast: -7.4 per cent; November: -6.7 per cent).
• Over 2014 as a whole, Chinese exports grew by 6.1 per cent while imports grew by 0.4 per cent. The trade surplus stood at a record US$379 billion.
• 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, surveys more than 1,000 consumers each week 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 16th 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 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
• Confidence levels aren’t soaring, but that hasn’t stopped consumers from spending. And with interest rates low, the job market improving and petrol prices falling, the outlook for spending is good.
• The Chinese economic data is pleasantly surprising. Exports are growing, imports aren’t falling to the same extent as in past months and the trade surplus was at record levels in 2014. The only bad news is that the good results have given the Aussie dollar a leg up.

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, surveys more than 1,000 consumers each week 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 16th 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 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.

 

What are the implications for interest rates and investors?

• Confidence levels aren’t soaring, but that hasn’t stopped consumers from spending. And with interest rates low, the job market improving and petrol prices falling, the outlook for spending is good.
• The Chinese economic data is pleasantly surprising. Exports are growing, imports aren’t falling to the same extent as in past months and the trade surplus was at record levels in 2014. The only bad news is that the good results have given the Aussie dollar a leg up.