Confidence up, but not yet reflected in sales

The switch from Tony Abbott to Malcolm Turnbull has improved consumer sentiment, but the positive outlook isn’t being seen in increased sales yet, according to data from the Australian Retail Index (ARI).

BDO National Retail lead partner Simon Scalzo said recent consumer confidence surveys pointed to a healthier outlook for the retail sector, but for the moment the ARI was steady.

“In the week prior to the change of leader we saw sales drop off quite sharply, with the Australian Retail Index down by 10 per cent,” Mr Scalzo said. “Much of this can be attributed to a return to normal conditions after strong sales leading into Father’s Day.

“Following the switch from Tony Abbott to Malcolm Turnbull, sales lifted by just under one per cent, led by fashion and accessories, which saw an increase of just under four per cent.

The ARI, created by BDO and Retail Express, draws on sales figures from thousands of retailers across the country. Mr Scalzo said the ARI is preparing for “phase two”, which will provide an extremely powerful tool for retailers who will be able to access daily data and analyse state-by-state data, as well as metropolitan-versus-regional data within states. The phase is in the final stages of testing and due to be launched later this month.

Turnbull turnaround

Consumer confidence surged 8.7 per cent in the week ending September 20, according to the ANZ-Roy Morgan ‘Australian Consumer Confidence’ report. This more than retraces the 7.1 per cent decline over the previous two weeks and leaves confidence above long-run average levels.

With no other substantive economic news or market movements to explain the outcome, the driver of the bounce was most likely optimism around the elevation of Malcolm Turnbull to the role of Prime Minister.

ANZ Chief Economist Warren Hogan said the sharp jump in consumer confidence is a clear vote of confidence in the new Prime Minister.

“A similar surge in business confidence was evident when the Coalition won government in late 2013,” he said.

“For the bounce to be sustained, however, the new Prime Minister and his colleagues will need to deliver a medium-term reform strategy in the context of a clear economic story for the country. As always, reform creates both winners and losers in the short term. The challenge for the Prime Minister is to effectively communicate that changes to the way the economy operates are in the community’s medium-term interest and necessary to raise incomes, create high-value jobs and sustain investment.”