Taking the pulse
This is an extremely fast-moving cycle: in the space of just three months Australia has experienced a spike in COVID-19 new cases, lockdown restrictions, deep declines in employment and spending, an unprecedented policy response, and world-leading containment and restart successes. In such a cycle it is more important than ever to stay abreast of current indicators and anecdotes and to avoid relying on outdated commentary.
This week it was reported consumer confidence for June rose 6.3% MoM after May’s 16.4% rise, retracing March-April’s 20.8% decline. Consumer confidence is now just 1% below pre-COVID-19 levels.
Consistent with this rebound, many recent company anecdotes are surprisingly constructive. Retailers Wesfarmers (WES), Harvey Norman (HVN), JB Hi-Fi (JBH) and Kogan.com (KGN) are all seeing unusually strong growth. Truck and car parts suppliers such as Bapcor (BAP) and Supply Networks (SNL) have seen business return to normal. Tech companies are benefitting from robust demand, and insurers from premium growth and reduced claims.
That said, there are others facing strong COVID-19 related headwinds, including apparel retailers, Coca-Cola Amatil (CCL) and media companies.
Looking ahead, assuming COVID-19 remains contained, zero rates, unprecedented fiscal stimulus and Australia’s strong positioning should limit the rise in unemployment and help drive a further rise in consumer confidence and robust consumer spending.
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