• Domestic air travel: In November, passenger numbers were up 0.2 per cent on a year ago while capacity fell 1.3 per cent. So the load factor on planes hit a 10-year high of 83.3 per cent
• Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating fell by 0.9 per cent to 115.7 but was still above the average of 114.3 held since 2014 and higher than the longer term average of 113.0 since 1990.
• New economic forecasts: The International Monetary Fund (IMF) tips 3.5 per cent growth for the global economy in 2019.
• Wine exports: Wine Australia report that exports grew 10 per cent by value in 2018 to $2.82 billion. By volume, exports lifted 5 per cent to 850 million litres.

The consumer confidence figures have implications for retailers, and other consumer-focussed businesses. Aviation activity data is important for airlines, hotels and regional Australia. Wine data is important for wine producers and regional Australia.

What does it all mean?

• Consumer sentiment has been bobbing around from week to week but continues to be above ‘normal’ – that is above longer-term averages. The sharp 10-15 cent a litre increases in petrol prices in Melbourne, Brisbane and Adelaide (end of discounting cycles) was one factor weighing on confidence levels last week.
• Airlines are doing well. More Aussies are flying and the airlines are managing capacity well – filling up planes rather than adding more flights (capacity). The load factor on domestic air routes is the highest in a decade. And add into the equation the fact that airfares have been rising, boosting revenues for the domestic carriers.
• The IMF has trimmed its forecast for growth in the global economy. But 3.5 per cent economic growth in 2019 would still be a result in line with the long-term (40-year) average. The past two years (2017 and 2018) were good years for the global economy – the best back-to-back gains in the past seven years. And if the US-China trade dispute is resolved in the next few months, arguably this may lead to future upgrades to forecasts, not downgrades.
• It has been another good year for Australia’s wine industry. The value of exports is up 10 per cent with volumes up 5 per cent. International buyers are clearly embracing Australia’s higher quality product, especially buyers in China. The value of exports to China (including Hong Kong and Macau) grew by 18 per cent to $1.14 billion in 2018.

What do the figures show?

Consumer Sentiment

• The weekly ANZ-Roy Morgan consumer confidence rating fell by 0.9 per cent to 115.7 but was still above the average of 114.3 held since 2014 and higher than the longer term average of 113.0 since 1990.
• Four out of five major components of the index fell last week:
  • The estimate of family finances compared with a year ago was down from +8.9 to +8.6;
  • The estimate of family finances over the next year was down from +30.3 to +27.2;
  • Economic conditions over the next 12 months was up from +0.9 to +4.3;
  • Economic conditions over the next 5 years was down from +8.4 to +7.6;
  • The measure of whether it was a good time to buy a major household item was down from +35.1 to +30.8.
• The measure of inflation expectations rose from 4.1 per cent to 4.3 per cent.

Domestic Air travel

The Bureau of Infrastructure, Transport and Regional Economics (BITRE) report:

• “There were 5.45 million passengers carried on Australian domestic commercial aviation (including charter operations) in November 2018, an increase of 0.1 per cent on November 2017. For the month of November 2018 there were 56 566 aircraft trips, a decrease of 2.8 per cent compared to November 2017.
• In November, 5.23 million passengers were carried on regular public transport (RPT) flights, an increase of 0.2 per cent on November 2017. For the year ending November 2018 there were 61.18 million RPT passengers, an increase of 2.2 per cent on the year ending November 2017.
• RPT revenue passenger kilometres (RPKs) performed were 6.00 billion for the month, up 0.3 per cent compared with November 2017. Capacity, measured by available seat kilometres (ASKs), decreased by 1.3 per cent compared with November 2017 to a total of 7.21 billion. With RPT passenger traffic increasing and capacity decreasing, the industry wide load factor (RPKs/ASKs) increased from 82.0 per cent in November 2017 to 83.3 per cent in November 2018, the highest monthly load factor recorded since October 2009. Load factors on individual routes increased on 37 of the 65 RPT routes.
• The greatest percentage increase in RPT passenger numbers, compared to November 2017, was on the Kalgoorlie – Perth route (up 18.2 per cent). There were large increases on a number of other routes, including Sydney – Townsville (up 17.2 per cent) and Brisbane – Hobart (up 11.6 per cent). Routes with traffic decreases in November 2018 compared with November 2017 included Proserpine – Sydney (down 20.2 per cent), Brisbane – Darwin (down 19.4 per cent), Darwin – Perth (down 15.4 per cent) and Brisbane – Proserpine (down 13.3 per cent).
• In November 2018, there were 2.09 million domestic passenger movements through regional airports, 0.3 per cent higher than in November 2017. Out of the top 50 regional airports, the strongest growth was at Griffith airport (up 30.8 per cent on November 2017), while the largest decrease was recorded at Proserpine airport (down 13.2 per cent on November 2017).”

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.
• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases data on domestic and international aviation each month. The data is useful in tracking consumer spending and airline performance.

What are the implications for interest rates and investors?

• Aussie households are reasonably happy with their lot. The job market is healthy, there are bargains to be had in retail outlets and the Aussie dollar is OK, but most would like it even higher. The outlook for retailers is positive, provided they come with an offering that entices consumers.
• The operating environment for airlines is positive. More are flying and prepared to pay higher fares. Shares in Qantas have lifted 16 per cent over the past year.
• The Chinese economy is expected to grow 6.2 per cent in 2019 and 2020, down from 6.6 per cent in 2018. A worry? No, rather it reflects the fact that the economy is maturing as a ‘developed’ economy. And 6.2 per cent growth is being applied on a larger economy – the contribution of China to world GDP will still holding near 30 per cent.
• The Chinese economy may have slowed in the past year, but the demand for Aussie wine certainly hasn’t. While the share price of Treasury Wine Estates eased from September-November in line with the broader market, it has lifted 15 per cent from the recent lows.
• CommSec expects interest rates to be unchanged until late in 2019.

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