Near-record business confidence: Business survey

Business survey; Consumer confidence; Household survey; Credit/debit cards

The NAB business confidence index rose by 11.2 points to 20.8 points in October – the second highest result on record. Business conditions rose by 6 points to 10.8 points.
The weekly ANZ-Roy Morgan consumer confidence rating rose by 0.6 per cent in the past week – the eighth gain in nine weeks to a 17-week high of 109.
The CBA Household Spending Intentions report was released. The CommBank HSI Index rose by a strong 6.6 per cent in October to be at 108, led by gains in Travel, Transport and Household services.
The number of prepaid cards rose by a record 14.4 per cent over the year to September.
According to the Housing Industry Association, new home sales increased 11.1 per cent in October compared to the previous month. Sales in the three months to October 2021 fell by 0.2 per cent.

The post-lockdown recovery continues with businesses and consumers more confident – in fact business confidence was second only to the April 2021 result (24-year history of the survey). Business conditions have also lifted but there are still a few hurdles. Some firms are finding it hard to get additional staff. Business purchase costs are still rising. And there is uncertainty about the sustainability and magnitude of consumer spending intentions.
The good news is that consumers have lifted spending on travel, transport and household services, entertainment and retail as economies in the south-east of the country reopen. But the latest data from the Commonwealth Bank suggests that spending intentions are easing on home buying and car buying – the latter being constrained by a shortage of stock.
At this stage the trends in price and labour costs constitute a watching brief. Supply chain difficulties are pushing purchase costs up but the flow-through to wages and retail prices is more constrained. The inference is that businesses are absorbing higher costs rather than passing them on – this may be part of the reason that there is currently a fair gap between business confidence and overall business conditions. So investors should be wary of the potential impact on corporate profit margins.
Consumers continued to pay down debt while in lockdown. The average credit card balance hit a 16-year low in September.

The NAB business confidence index rose from +9.6 points to +20.8 points in October (long-run average: +5.3 points). And the conditions index rose from +4.8 points to +10.8 points (long-run average: +5.7 points).
Trading conditions, profitability, employment, forward orders and capacity use all rose in the month.
The survey was conducted in the period October 19-29, 2021, covering 400 firms.
The proportion of firms reporting that they did not require credit eased from around 58 per cent to 56 per cent.
In terms of prices and wages, NAB noted “Inflation indicators remain elevated with purchase cost growth reaching decade highs and labour costs also rising in October. Output price growth was steady but retail price growth eased.”

The CommBank HSI Index rose a strong 6.6 per cent in October to be at 108.0, led by gains in Travel, Transport and Household services. The Home buying spending intentions index was 1.4 per cent lower on the month, but still remains well up on an annual rate at 12.4 per cent. The Retail spending intentions index rose at a solid 9.1 per cent in October, reflecting the reopening of large parts of the economy in September.
Full details of the report are here: www.commbank.com.au/HSI

Consumer confidence rose by 0.6 per cent in the past week – the eighth gain in nine weeks. The index reading of 109 points is a 17-week high (long-time average 112.5 points). Four out of the five major sub-components rose last week with consumer views on ‘future financial conditions’ jumping by 2.0 per cent.
The authors wrote: “There was an improvement in Sydney (4.1 per cent), but confidence declined in regional NSW (-1.0 per cent). Confidence in Melbourne dropped -4.4 per cent, while for the rest of Victoria it was up 9.4 per cent. Among the other states, confidence declined in Queensland (-6.0 per cent) but rose in South Australia (5.2 per cent) and Western Australia (11.9 per cent).”

The number of prepaid cards eased slightly from a record 11.42 million in August to 11.39 million in September. Prepaid cards are up a record 14.4 per cent on a year ago.
The number of debit card accounts rose by 0.8 per cent to a record 36 million in September.
The number of credit card accounts fell by 0.2 per cent to a 15-year low of 13.18 million in September (lowest since November 2006).
The average credit card balance hit a 16-year low of $2,632.86 in September.
The number of cheques drawn hit a record low of 2.52 million in September (19 year history).