Victoria’s second wave of COVID-19 is pulling down jobs and consumer spending

Summary

• The lockdown imposed in Victoria is dragging down the nation's jobs market and consumer spending.
• ANZ and CBA data shows a deteriorated spending in Victoria due to stage 4 restrictions, but a rise in spending for the rest of the country.
• While ABS data revealed that payroll jobs fell by 1.2% between 11 July-25 July in Victoria, the NAB business survey indicated that business confidence had taken a hit due to new lockdown in Victoria.

Victoria's shutdown to deter coronavirus transmission is slowing down the labour market and consumer demand nationally, holding back the national economic rebound from the pandemic recession.

While spending growth in Victoria has gone into reverse due to stage 4 restrictions, spending in other regions persists to rise, but at a slower rate than compared to the prior year as shown by latest statistics of major banks and ABS. The data revealed the extent to which lockdown in Victoria is weighing on the rest of the economy.

Let's have a look at the most recent spending patterns in Victoria and the rest of the nation.

Spending falls in Victoria and confidence continues to deteriorate, as per ANZ

ANZ internal card and merchant data highlighted the effect of Victoria on the economy, with expenditure 12% lesser than a year before for the week to 8 August, reflecting Victoria's worst performance since early May. The Melbourne lockdown has hit major parts of Victoria's economy, with spending on dining and takeaway down 59% year-on-year, while fashion spending is 60% lower.

In NSW, which has closed its borders with Victoria, spending was just 3% up on the same week, a year before, while the remaining parts of the nation were 17% more robust.

ANZ-Roy Morgan consumer confidence fell 2.1 points to 86.5 on August 8/9 last week and is at the lowest for over 3 months since April 25/26 2020. While financial and economic conditions demonstrated a mix of good and bad times, current finances gained 2.7%, and future finances fell 1.9%.

David Plank, ANZ head of Australian Economics, stated that the move to stage 4 restrictions in Victoria led to downward pressure on sentiment with confidence dropping to the lowest level since the last weekend of April. He also added that the buoyancy of sentiment towards financial conditions persisted on being a component of the survey, but only in a relative sense as it is still low in absolute terms and speaks to a likely unwillingness on the part of the households to spend.

ABS data reveals a drop in payroll jobs

As per ABS figures released on 11 August, the number of payroll jobs fell 0.1% nationally between 11 July - 25 July, while Victoria witnessed a fall of 1.2% jobs in the same period.

Bjorn Jarvis, Head of Labour statistics at ABS, stated that payroll jobs had stayed 4.5% lower than middle of March, when Australia noted its 100th coronavirus case. He also added that by 25 June, Victoria had regained about 40% of the jobs it had lost since mid-April, but was decreased to 24% by the end of July.

Source: ABS

The accommodation and food services, as well as Arts and recreation services industries, were the most affected ones by payroll job losses amid coronavirus period.

Commonwealth Bank data shows weak spending in Victoria

In an update from 11 August, CBA noted that annual spending growth had eased a bit in recent weeks, with strong spending on goods, however, services spending is still down over the year.

Separate numbers from Commonwealth Bank, covering its card and merchant network proposed that a few Victorians went on spending spree before the stage 4 limitations began, with an uptick in food and liquor buys in the week ending 7 August.

Though spending on household furniture and equipment lifted in Victoria, all other expenditures including clothing & footwear, personal care and recreation, fell in the state. Transport spending has been quite feeble in Victoria and NSW, and other statistics indicate mobility across Sydney and Melbourne, in particular, remain way below usual standards.

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Source: Commsec

CBA likewise found that credit and debit card spending increased 8.4% nationally over the same week (ended 7 August) a year ago, it was being led by a 20.8% bounce in online purchases.

CBA asserted that the full effect of stage 4 restrictions would not be seen until the next week's data as retail stores were permitted to operate until 6 August 2020. Also, the bank does not anticipate services spending to make a full recovery until all restrictions are relaxed.

NAB Survey reflected business confidence taking a hit amid new lockdown in Victoria

Amid the second wave of coronavirus infections in Victoria, business confidence turned sharply negative last month, just as the majority of employers has started to feel optimistic about the future again.

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NAB survey was conducted from 22 July -31 July prior to the imposition of stage 4 restrictions in Victoria, wherein, business conditions witnessed an improvement.

Some highlights of the survey are as follows:

• NAB's business confidence index plunged by 14 points in July, pulling the index into negative zone at -14.
• Business conditions rose 8 points in July to 0 index points.
• Improvement was seen in trading and profitability, while the employment index rose in July though it stayed slightly negative.
• Business confidence saw a significant deterioration across all industries and in every state (most substantial fall noticed in Victoria and NSW) except SA and WA.

Alan Oster, NAB Group Chief Economist, stated that while the rebound in conditions is promising, the fall in confidence even before the declaration of stage 4 restrictions in Melbourne shows that businesses would remain exceptionally careful given the extraordinary vulnerability around the infections right now. This further indicates that the business sector would require ongoing assistance during the recession period before the economy recovers.