Charting an easing of restrictions

ANZ Research still expects spending to spike with each announcement of restriction easing but the longer term trend of retail spending is likely to be weak, reflecting reduced incomes and poorer financial stability for many households (though with some mitigation from JobKeeper or JobSeeker payments).

"Social categories are still improving as movement and socialising increase…. Spending on dining and takeaway, accommodation and transport categories is also rising.”

The preliminary estimate for retail sales in April represents the biggest monthly fall on record. It more than eroded March’s record growth. April represents the worst of the COVID-19 effects for consumers, including the strictest of lockdown conditions and the most job losses across the country.

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Social categories are still improving as movement and socialising increase. Clothing and beauty services are moving up in tandem and are now 35 per cent and 38 per cent, respectively, below 2019 spend. Spending on dining and takeaway, accommodation and transport categories is also rising.

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Home-related spending peaked in the first week of May but is still very strong. ANZ-observed spending suggests consumers have shifted from the essentials of lockdown living (year-on-year growth in office spending has eroded) and have been focusing more on entertainment and furniture and homewares.

This shift towards furniture and homewares may reflect a shift to home entertaining as restrictions on inviting guests over eases.

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Grocery spending is contributing substantially to total spend growth but the relative growth of essentials (grocery, pharmacy, toiletries) and other retail categories is looking more normal.

ANZ Research expects non-essential spending to eventually weaken as the excitement of eased restrictions wears off.

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The true growth in spending may be further from the early-May peak than the data suggest because use of cards increased (and cash decreased) meanwhile spending going into the election last year was subdued. These factors may inflate the year-on-year comparison.

State-by-state spending

ANZ-observed retail spending in Victoria is faring far worse than other states reflecting very strict restrictions and the state’s exposure to tourism-related spending. Spending is growing the strongest in New South Wales and Western Australia.

All states, except for Victoria, show retail spending growing by 10–20 per cent year-on-year for the week to 15 May. Victoria’s very strict lockdown conditions are delaying an increase in spending.

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ANZ-observed retail spending in New South Wales has held up well compared with other states despite being particularly exposed to international tourism and recording the most COVID-19 cases in Australian.

Queensland spending has dropped the most quickly from its restriction-easing peak, while Western Australia has kept up most of its spending from early May.

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Adelaide Timbrell is Economist and David Plank is Head of Australian Economics at ANZ

*ANZ-observed spending is:

Proprietary data sourced from bank’s internal systems and includes, but is not limited to, card transaction data and merchant facility transaction data.

Desensitised, de-identified and aggregated.

Not scaled up to represent total household spending in Australia.