– Consumer sentiment: The ANZ-Roy Morgan consumer confidence rating rose by 0.7 per cent to 118.6 in the past week. The index is well above the average of 114.2 held since 2014, and above the longer-term average of 113.0 held since 1990.
The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.
– Aussie consumers are resilient. Despite sharemarket gyrations and the inconvenient interruptions provided by global and domestic politics, confidence levels of Aussie consumers are above “normal”. The strong job market and falling petrol prices and clear positives for consumers together with the ongoing deals provided by global and domestic retailers.
– Aussie consumers also tend to like a firmer Aussie dollar as it is considered favourable for maintaining spending power when shopping or travelling overseas. So an Aussie near US72-73 cents, rather than US70-71 cents a few weeks ago, serves to support confidence levels.
– Retailers will be pleased by the trading environment. The job market is strong, wages are ticking higher and petrol prices are well down from recent highs.
– The ANZ-Roy Morgan consumer confidence rating rose by 0.7 per cent to 118.6 in the past week. The index is well above the average of 114.2 held since 2014, and above the longer-term average of 113.0 held since 1990.
– Three of the five components of the index decreased last week:
– The estimate of family finances compared with a year ago was down from +6.7 to +6.2;
– The estimate of family finances over the next year was down from +25.2 to +21.4;
– Economic conditions over the next 12 months was up from +9.9 to 15.4;
– Economic conditions over the next 5 years was down from +16.6 to +15.7;
– The measure of whether it was a good time to buy a major household item was up from +30.7 to +34.1.
– The measure of inflation expectations fell from 4.2 per cent to 4.1 per cent.
– 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.
– Consumers remain positive but they aren’t getting carried away. One of the key areas to watch is the collective attitude of consumers on their future finances. There has been a softening in views in recent weeks, suggesting some conservatism on current and future spending.
– Construction activity: Construction work done fell by 2.8 per cent in the September quarter – only the second decline in the past two years. However, in the year to September, construction work done was at record highs in NSW, Victoria and South Australia.
– Construction inflation: Construction costs rose by 0.9 per cent in the September quarter with building costs up 1.2 per cent. On the year, construction costs were up 3.1 per cent (decade average +2.2 per cent) – down from the 9-year high of 3.5 per cent in the June quarter.
– Engineering inflation: Engineering costs rose by 0.6 per cent in the September quarter. Over the year, engineering costs rose by 3.5 per cent (decade average +2.4 per cent).
The data on construction work is important for builders, building material companies and developers.
– Construction work ebbs and flows from quarter to quarter. After rising by 4.4 per cent in the first half of 2017, construction work eased by 2.8 per cent in the September quarter. Still, overall the amount of work remains high. In fact in trend terms, construction work is at 3-year highs and just down from the mining boom highs over the period 2012–2015.
– While construction work in the mining states has softened, in NSW construction work done hit record highs in the September quarter, just short of $17 billion. In fact, construction work over the past year was at record highs in NSW, with Victoria and South Australia also completing the most construction work for a 12-month period.
– With so much work, construction costs are understandably rising at a reasonable clip. For the past 18 months, construction costs have been rising at an annual rate greater than 3 per cent. With more talk that skilled workers are hard to find, construction sector inflation will be watched carefully in coming months.
– Construction work done fell by 2.8 per cent in real (inflation-adjusted) terms in the September quarter – only the second decline in the past two years. Work done is down by 16.9 per cent on a year ago.
– Public sector construction work fell by 1.0 per cent in the quarter and private sector activity fell by 3.4 per cent.
– Construction work fell in five of the states and territories in the September quarter. Leading the falls was Northern Territory (down 33.6 per cent); followed by South Australia (down by 8.6 per cent); Queensland (down by 6.4 per cent); Western Australia (down by 3.6 per cent); and Victoria (down by 2.3 per cent).
– Construction rose in the ACT (up by 13.3 per cent); Tasmania (up by 4.4 per cent); and NSW (up by 2.2 per cent – to record highs).
– Engineering work fell by 4.5 per cent in the September quarter, and is down 34.4 per cent over the year.
– Commercial (non-residential) building fell by 2.4 per cent in the September quarter but was still up by 2.3 per cent on the year.
– Residential building fell by 1.0 per cent in the September quarter but was up by 5.4 per cent over the year. Alterations & additions rose by 4.7 per cent in the quarter, while new residential work fell by 1.8 per cent.
– Construction costs rose by 0.9 per cent in the September quarter, with building costs up 1.2 per cent. On the year, construction costs were up 3.1 per cent (decade average +2.2 per cent), down from 3.5 per cent in the June quarter and 3.0 per cent in the March quarter. Building inflation was 2.8 per cent and engineering inflation was 3.5 per cent.
– The Bureau of Statistics releases quarterly estimates of Construction work done. The estimates are based on a survey and cover around 85 per cent of the construction work done in the period. Revised estimates will be released in coming months. The data is useful largely for historical purposes but the work yet to be done estimates provide an early warning signal of future activity. The residential work figures give a good early guide to the strength of residential investment in the national accounts.
– Buoyant activity levels exist in the construction sector. In fact activity is a little too frothy in some areas with workers in big demand and cranes dominating skylines across a number of capital cities. In fact Brickworks noted yesterday the ‘unprecedented’ demand for bricks in Victoria. Activity levels may ease in residential building over the coming year but there remains a healthy amount of social and economic infrastructure activity.
– Experts expect official interest rates to remain stable until later in 2019. But cost pressures in the construction sector and upward pressure on wages need to be watched closely.
– A strange quirk of the statistical calendar is that each change of seasons in Australia is ushered in by a bevy of economic events. And so the ‘Summer Tsunami’, with more than a dozen indicators or events scheduled in the next fortnight.
– The week kicks off on Monday when the Australian Bureau of Statistics (ABS) releases the Business Indicators publication for the September quarter. The data on inventories or stocks is a direct input to Wednesday’s economic growth figures.
– The ABS also publishes the building approvals data on Monday – a key leading indicator for home building.
– And CoreLogic publishes the November results for home prices also on Monday. Home prices may have fallen by 0.8 per cent in November with weakness concentrated in Sydney and Melbourne.
– On Tuesday, the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan. And the ABS publishes quarterly data on government spending and the Balance of Payments – the broader data on the trade position.
– The Reserve Bank Board meets on Tuesday but no rate change is expected.
– On Wednesday the ABS releases the National Accounts – containing the key reading of economic growth in the September quarter. The current annual growth rate of 3.4 per cent is well above the 2.75 per cent long-term average.
– Also on Wednesday the Federal Chamber of Automotive Industries issues the November new vehicle sales figures.
– On Thursday, the ABS releases the International trade data (data on exports and imports) for October. Retail trade data is also issued while Reserve Bank Deputy Governor Debelle delivers a speech.
– Ordinarily the US jobs data would hog the limelight in the first week of December. But financial markets will respond to the US-China trade discussions (November 30-December 1), testimony of the US Federal Reserve chair on Wednesday and the OPEC oil ministers meeting on Thursday.
– The data week kicks off on Monday in the US when the Institute of Supply Management (ISM) issues the manufacturing purchasing managers survey. An equivalent survey is released in China by the private sector, Caixin media group.
– Also in the US on Monday, data on construction spending is released with new vehicle sales data. A modest 0.4 per cent lift in construction spending is tipped for October. And vehicle sales were at an 11-month high in October at a 17.57 million annual rate. Investors will be interested as to whether the upward sales trend continued into November.
– The usual weekly data on US chain store sales is released on Tuesday along with the ISM New York index and IBD/TIPP economic optimism gauge.
– On Wednesday in the US, the Federal Reserve chair, Jerome Powell, will give testimony of the economic outlook before the congressional Joint Economic Committee. Expect more focus on ‘neutral’ interest rates.
– Also on Wednesday, the ISM issues the services sector purchasing manager’s survey. Little change is expected on the current index of 60.3 – well above the 50 reading that separates expansion from contraction.
– The regular weekly data on mortgage applications is released also on Wednesday with the ADP employment survey, productivity & labor cost data and the Federal Reserve Beige Book.
– The ADP survey is expected to show that 189,000 private sector jobs were created in November. The Beige Book is a summary of conditions in Federal Reserve districts and is an important signpost ahead of the expected rate hike to be delivered on December 19.
– On Thursday in the US, the October data on international trade is issued together with the weekly data on new claims for unemployment insurance, factory orders and the Challenger survey of job cuts.
– Economists expect little improvement in the trade deficit for October, with a deficit near US$54 billion. Interestingly, the Chinese trade data is scheduled to be released on Saturday (December 8). Inflation data follows on Sunday December 9.
– On Friday, the non-farm payrolls (employment) data is issued with the jobless rate, hours worked and average earnings data. A 205,000 lift in jobs is expected.
– Also on Friday in the US, the preliminary December reading of consumer sentiment is issued with consumer credit and wholesale inventories figures.
This Freightplus article contains information obtained from sources believed to be reliable and has been prepared in good faith and with all reasonable care. Freightplus makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this website.
Neither Freightplus (Australia) Pty Ltd, its related entities, nor any of its providers of information, have any liability to the user, or any other third party, for the accuracy of the information or models contained in this article, or for any errors or omissions therein, nor will Freightplus (Australia) Pty Ltd or any of its providers of information have any liability for the use, interpretation or implementation of the information or models contained herein by any person.