Spending plummets and consumer confidence hits all-time low

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The panic buying that accompanied the start of the COVID-19 lockdown has eased and spending has plummeted by 20 per cent compared with last year’s levels, according to data from the Commonwealth Bank.

And a Westpac consumer confidence survey shows the largest monthly fall on record, with one in five respondents reporting that they had lost their entire income in March.

Despite queues outside bottle shops and purchase restrictions just weeks ago, alcohol purchases have plummeted, along with spending on clothing (down 58 per cent), personal care (down 61 per cent) and transport (down 44 per cent).

The Commonwealth Bank’s analysis of card transactions showed that the March spike in alcohol sales faded quickly.

“Spending on alcohol had been holding up because of the spike in sales at bottle shops,” CBA head of Australian economics Gareth Aird told Business Insider Australia. “But alcohol spend has since rolled over as the unprecedented drop in spending at hotels, pubs and bars far outweighs the lift in sales at bottle shops.”

A 23 per cent lift in sales through bottle shops could not offset a 72 per cent collapse in spending through hotels, pubs and bars.

The analysis showed that “spending on pretty much everything plunged” in the lead-up to the Easter long weekend with lockdown measures in place.

“In the week to 10 April, total credit and debit card spend was down by 20 per cent on year-ago levels,” said Mr Aird. “Spending on goods, which had previously been sitting at above-average levels, has eased to sit just three per cent higher over the year.

“Meanwhile, spending on services has continued to plummet and is now down by 44 per cent over the year.”

Spending on medical services is starting to fall. Household furnishings and equipment are still up 10 per cent on the same time last year, but the huge growth in early March is coming to an end.

Sales of food items, mostly via supermarkets, are up 28 per cent on the same time last year. However, food services, covering restaurants and cafes, were down 38 per cent.

Mr Aird said: “The biggest annual declines in credit and debit card spending are in Victoria and New South Wales. Our two largest states have more exposure to the most heavily impacted services sectors and less exposure to the more insulated sectors [like] agriculture [and] mining.

“In addition, they are more impacted by the abrupt temporary halt in net overseas migration.”

Consumer confidence in the economy suffered its worst monthly fall on record, dropping 31 per cent, according to Westpac’s consumer survey released on Wednesday.

“This is the single biggest monthly decline in the 47-year history of the survey, taking the index beyond GFC (global financial crisis) lows to levels only seen during the deep recessions of the early 1990s and early 1980s,” said Westpac chief economist Bill Evans.

“The details of the survey … are all very disturbing and reflect the large shocks to jobs and spending. However, the most surprising message is the collapse in confidence in the housing market,” he said, adding that had declined to GFC levels.

The survey found that seven per cent of respondents had lost their job in March and another 14 per cent had been stood down without pay.

“This survey result implies that over one in five workers have lost their entire wage income,” Mr Evans said.

However, the Westpac survey showed that the medium-term view allowed cause for optimism.

It said the extreme negative economic outlook was confined to the near term with the “economy next five years” sub-index down just 3.8 per cent in the month. “At 87.0, this sub-index is still comfortably above recent cyclical lows (it averaged 85.5 over the second half of 2014).”

Are you optimistic that the economy will bounce back in the medium term?

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Written by Janelle Ward


Total Comments: 10
  1. 0

    You don’t have to be Sherlock Holmes to know that if you close down non-essential retailers, put people in isolation and fine them if they try and get out of their homes that spending will suffer.

  2. 0

    Well, duh!
    What I would be interested in is a story forecasting the winners and losers when this all is over.

    Supermarkets will still do OK, but in more exotic items, as the morons tire of eating through their egg, flour, baked beans and pasta stockpiles. I also suggest travel will boom, restaurants and coffee shops will do very nicely for some time, but there will be a slump in toilet paper. I recommend selling off your shares in Cruise ships.

    I will certainly be having more food out, in cafes and restaurants, especially those who struggle through and adapt. Like business overall, this will sort out the sheep from the goats, very effectively.

    • 0

      Some people haven’t been able to buy Baked Beans at all for several weeks. I know a couple who wanted one can of Baked beans they only buy one can to replace the one they have eaten. They couldn’t get one of any brand or size.
      I haven’t panic bought but I did buy extra last week – mainly perishables as my fridge was almost empty. Even then I didn’t fill it as I don’t need to.

  3. 0

    At last someone giving an accurate report about alcohol consumption. Before one only counted the increase in bottle shops without considering the loss of consumption in clubs, pubs and restaurants. We do not drink any more than before this crisis but we have to do it at home.

  4. 0

    Well, I drink very little alcohol, generally only Lemon, Lime and bitters, but the hotels, restaurants RSL’s are closed, so no drinking. Restaurants are closed, so no meals out. Most dress shops are closed. Libraries are closed, but at least QBD books are open. BUT I am in the 70+ age group, so in home isolation, and reluctant to purchase online when I can’t try clothes on. Would never buy shoes without trying on. Is it any wonder that we don’t spend much money? Certainly don’t want to get an exhorbant fine from the police if I hop in the car and found to be too far from home, so my car is in the garage, not using any fuel.

    • 0

      Time to get some tradies in to do repairs, cannot spend much either, but I do drink, also in my 70s and in isolation. Petrol under a dollar and can’t go anywhere so the patio gets repainted and some odd things fixed up. The locals need work.

  5. 0

    The uncertainty as to whether the banks will crash has meant that people with savings are spending some of their savings on things they have been thinking of buying for a while. I think as long as those with some rainy day savings are prepared to spend some of this savings, we will not fall into another great depression. As for those who normally put their purchases on various debt cards, it’s probably a good thing if they cut back their spending for now.

    • 0

      Hi Aussiecarer, well thought out, but I don’t get why you criticise spending on credit cards etc, – it is important to understand that Governments can make money out of nothing, but so can banks, – you spend $100. from your credit card, – the bank enters that amount on their credit side, and YOU pay them back, – they just changed a figure in the books, took 1 minute, actually less, the computer does it automatically, and you get to go out and give them that money that they never even had before.
      Currency traders, and high speed computer buying and selling of shares also create money out of nothing.

      So the long term discussion we really need to have is what should the money be spent on.
      To quote a classic example, when the Exxon Valdez oil tanker went down, there was enormous response, – people trying to push the oil away from their coasts, people cleaning up the oil from their beaches, people trying to salvage the tanker, Tourists coming to see what was happening, news, govt investigations, – it was like an ants nest stirred up, – by one economic indices, lots of money going around, lots of Activity, pretty well loss all around, – the oil gone the tanker gone, local tourist and fishing industries destroyed, a big zero at the end of the day, lots of Activity, but no Legacy.
      Froth and bubbles, but no substance, although the bills do get paid today, not an inconsiderable benefit.

      It is the old give a man a fish, and he eats today, that is activity, teach him how to fish, and he eats every day. That is Legacy.

      Well, blind Freddy can see the importance of Australia building a nationwide renewable energy network, energy is The Thing these days, Australia has one of the largest renewable energy potential on the Earth, – Wind, Sun, Tides, Waves, Geothermal, we have it all, in spades.

      To do that, build all that infrastructure, and connect it all together, would solve almost all of our problems, – the next generation would have plenty of work, plenty of inducement to get educated to help the Great Australian Renewable Revolution, – as each segment was included, the price of energy will come down, – as renewable energy requires no fuel, it is Free.
      There would be so much electricity available that we could supply Indonesia and Malaysia with electricity, – much more profitable than supplying Coal, – the which they don’t really want anyway, and not only get rid of our own green house gases’ emissions but their’s also.

      You know, it is a funny thing, a few years ago several Oz States sold off their electricity networks, – very arguably Legacy, and for a song, but one thing included was the old coal fired power plants, highly touted by some as wonderful, even though most of them were very old and worn and needed far more money to keep them going than the buyers realised.
      I doubt that the politicians knew that either, but in a way it was very sensible, – it was time to build a replacement, but instead they spent that money on fripperies and pork barrelling, as corruption had taken their souls.
      I really strongly believe that politicians should not be able to receive any bribes, gifts favours and indeed far lower wages, for democracy to survive in Australia. – or anywhere else in the world either..

      Back to the topic, although please believe me spending on Legacy is the way to go to the future, – now spending on Activity is vital, – that is what will send the daily receipts of businesses up, and in the short term, also the subsidising of wages, – so people can live and support their families, so whilst dragging their feet, the Govt has to their credit done that, – give to the poor, they will spend it as have little to start with, , – and then the next level up then the wage earners, – all keeps the economy running, – good, but at some stage there has to be a conversation in Australia, – by Australians, what should we really spend our money on, because have no doubt we can spend as much as we like, on – activity? or Legacy? and if so, What legacy?
      Giving our valued labour to the 701 MultiBillionaires, mainly in America, – land of the free, er, crazy, will not produce legacy except for them, – they regard Legacy as something to buy, – at rock bottom prices, and then rent, so want to buy all our rivers, roads, electricity systems, factories, fields etc. – everything so they can just sit there like a fat toad and get rent, – money for nothing, forever, – well not forever as their greed is behind the Climate crisis, but they are too greedy to understand that.



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