Consumer confidence: The ANZ/Roy Morgan consumer confidence rating lifted from an 11-month low, rising by 1.6 per cent in the latest week.
Cyclone watch: Investors continue to watch the progress of Cyclone Debbie in the Bowen region of north Queensland. The Bowen-Mackay region is important for sugar cane production, coal exports, tourism and production of a raft of vegetables like cucumbers, melons, beans and mangoes.
What does it all mean?
Consumers broadly remain confident, but by no means exuberant – probably more watchful. And that makes sense given discussion about higher energy prices, lofty home prices and increases in health insurance premiums although the Aussie dollar remains firm and petrol prices have eased from recent highs. Confidence is just above the average rating over the past two years as well as above longer-term averages.
Investors continue to watch the progress of Cyclone Debbie near Bowen in north Queensland. The ports of Mackay, Dalrymple Bay, Hay Point and Abbot Point, were closed on Tuesday ahead of the cyclone hitting the region. There should be minimal impact on broader Australian economic growth as the weather event is hitting late in the March quarter. Any delays to production should be caught up over the June quarter. Any repairs to damaged buildings and infrastructure will boost economic activity over coming quarters.
Most concern surrounds the impact of the cyclone on sugar crops in the Bowen-Mackay region. Around a quarter of all sugar produced in Australia comes from the Mackay-Proserpine region according to the Australian Sugar Milling Council. And including Herbert-Burdekin, 62 per cent of all sugar produced in Australia comes from cyclone-affected regions with production estimated by Canegrowers at $1.1 billion. Sugar harvest generally begins around early June.
The Bowen region is also a key producer of vegetables like melons, mangoes, tomatoes, capsicum, chilli, beans, sweet corn, cucumber, pumpkins, eggplant, citrus, zucchini, squashes, passionfruit, lychees and coffee. Some estimates suggest the region is the largest winter growing region in Australia. Any destruction or delays to vegetable supplies will lead to higher prices, affecting inflation figures for the entire June quarter.
The Bowen region is also a notable producer of poultry, beef cattle and fruit and nuts.
According to REMPLAN, Whitsunday’s Gross Regional Product (GRP) is estimated at $2.315 billion. Whitsunday represents 15.51 per cent of Mackay Statistical Division GRP of $14.930 billion, 0.73 per cent of Queensland’s Gross State Product (GSP) of $316.208 billion and 0.14 per cent of Australia’s GRP of $1.655 trillion.
What do the figures show?
Consumer confidence
The ANZ/Roy Morgan consumer confidence rating rose by 1.6 per cent to a three-week high of 113.8 in the week to March 26. Confidence is down 0.6 per cent over the year but above the average of 113.2 since 2014. Four of the five components of the index rose in the latest week:
The estimate of family finances compared with a year ago was steady at +5;
The estimate of family finances over the next year was up from +21 to +25;
Economic conditions over the next 12 months was up from -3 to -1;
Economic conditions over the next 5 years was up from +4 to +6;
The measure of whether it was a good time to buy a major household item was up from +33 to +34.
In addition the inflation expectation 2 years ahead, rose from 4.1 per cent to 4.3 per cent. Inflation expectations have now held above 4 per cent for the past 15 weeks.
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.
What are the implications for interest rates and investors?
CommSec expects the Reserve Bank to remain on the interest rate sidelines for an extended period.
Consumer confidence is just OK, but it shouldn’t be providing either significant upward or downward pressure on retail spending at present.
Cyclone Debbie will lead to temporary delays for coal exports, may lead to lower sugar production, and may serve to lift prices for a variety of vegetables. There is also the real expectation of damage to infrastructure, buildings and tourism facilities, impacting insurers, utilities and economic activity in the region. The advanced preparations made by businesses and emergency services should minimise impact on the region.
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