A smaller than expected dent to consumer confidence through December and a bumper month for the retail sector in November may offer cause for optimism, but economists warn that the worst of Omicron’s impacts could still lie ahead.
The results of ANZ-Roy Morgan’s consumer confidence survey for December showed a slide of only 2.2%, less than a week after the big four bank reported national spending levels had plummeted to their lowest since Delta lockdowns throttled the nation’s capitals last year.
Confidence metrics used by the bank registered mixed results. As consumer confidence in “current economic conditions” took a hard fall of 8.7%, Australians reported increased confidence in their “current financial conditions,” which rose 1.4%, along with their “future financial conditions,” which crept up 0.7%.
David Plank, head of Australian economics at ANZ, said given how much Australia’s surging Omicron cases have impacted spending, the fact that confidence is “only down modestly is probably better news” than most were expecting.
“Confidence fell in all the major capitals, with Adelaide faring the worst,” Plank said.
“The good news is that people are still relatively happy about their own financial circumstances. This potentially sets things up for a rapid rebound once people are more confident about health outcomes,” he said.
Even still, confidence in current health policy settings could still be a way off, others warn, as average national case numbers around 100,000 all but rule out the robust economic rebound members of the Morrison government have long been promising.
The warnings come as the Australian Bureau of Statistics reported that Australian retail sales hit a record high of $33 billion in November, buoyed by a swarm of shoppers released from lockdowns in NSW, Victoria and the ACT in late October.
Sean Langcake, senior economist at BIS Oxford Economics, said concerns over stock availability and delivery times ahead of Christmas could also be chalked up as likely contributors to the strong result.
“Disruptions due to the omicron variant will be limited in the December data, but they will pose a challenge in early 2022,” Langcake said.
“Consumer caution will reduce in-store foot traffic, while disruption to supply chains and labour availability will further limit sales.”
According to the ABS, November’s 7.3% monthly surge was the highest the Bureau has ever recorded.
Callam Pickering, economist at Indeed, said even though November’s retail results exceeded analysts’ expectations, the trend isn’t likely to continue.
“Quite simply, the Australian retail sector experienced a bumper Christmas period. Earlier lockdowns and high household savings, along with fiscal stimulus, combined to create a high spending environment,” Pickering said.
“Unfortunately, that may prove short-lived, with growing evidence that spending softened towards the end of December and into January in response to the growing threat of omicron,” he said.
“Cautious households and supply shortages may weigh heavily on the retail sector through early 2022.”
Early consumer spending data from ANZ appears to signal as much. According to the bank, most of the post-Delta gains for retail spending had been reversed in January, thanks in large part to staff shortages and self-imposed household isolation.