Christmas retail cash splash expected as Australian shoppers raid COVID-19 savings

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Despite months of lockdowns, lost incomes and travel restrictions this year, most Australians are expected to splash their stash of cash this Christmas.

The Commonwealth Bank’s Household Spending Intentions (HSI) Index is the highest level its been since just before the COVID-19 pandemic began.

Its snapshot of people’s spending activity, as well as their spending intentions, rose 2.1 per cent in November, to reach 110.3 points.

It nudges the record high since the index began in 2019, of 111.1 points recorded in December that year.

The bank’s chief economist, Stephen Halmarick, said the data showed Australia’s economic recovery from the most recent east coast lockdowns was strong.

He explained that this was because households that were unable to undertake their normal spending on many services during lockdowns have been stashing away hundreds of billions of dollars in additional savings, compared to pre-COVID levels.

“Australians have grown their savings to record levels during the pandemic,” he observed.

“CBA estimates households have accumulated approximately $240 billion in excess savings, money that is ready to be spent as we head into Christmas, and the signs are good for robust retail sales during this period.”

What are people planning to spend their money on?

“The HSI index shows a continued and broad-based recovery in consumer spending since the end of lockdowns,” Mr Halmarick said.

“While we have seen sharp increases in categories like transport and travel, there is still plenty of room for further growth.”

The retail sub-category of the index was up 9.6 per cent in November, to be up 5.6 per cent over the previous 12 months.

Retail spending has risen 21 per cent since a low point in August, with the largest gains in department stores, clothing, furniture and household equipment, electronic stores, household appliances, jewellery and watches, as well as pet shops.

“In a further positive note, it looks like end-of-year celebrations have driven increased spending on cosmetics, tailors and alterations, and clothing rentals,” Mr Halmarick said.

The biggest increases in the index — which combines spending activity with Google Trends — were in transport (up 21.5 per cent) and travel (up 14.7 per cent).

And the travel index is up 25 per cent on an annual basis, showing people are ready to pack their bags and take a holiday.

“Significantly, the travel spending intentions index is now up 77 per cent from the Delta lockdown low of August 2021, but is still 30 per cent lower than its pre-Covid levels of November 2019,” Mr Halmarick said.

As Australians embark on longed-for holidays, spending is up on hotels, motels and resorts, travel agents, airlines, tourist attractions, camper and RVs and their rental, cruise ships, bus lines and airports.

The transport spending intentions index jumped 21.5 per cent in November.

Didn’t everyone spend up big in Black Friday sales?

Yes, they did.

NAB’s analysis of merchant transactions estimates that Australians spent more than $8 billion across the four days from Black Friday to Cyber Monday.

It said the promotional holiday beat pre-pandemic records from 2019, with sales up 8 per cent.

“Business is absolutely up and running again — it was great to see people out and about making the most of bargains as well as spending big online,” wrote Andrew Irvine, group executive for NAB’s Business and Private Bank after the sales weekend.

“It may be a trend adopted from our American friends, but it’s clear that Black Friday and Cyber Monday are now a strong part of the sales calendar here in Australia.

“For business, it’s a great opportunity try out initiatives before the holiday season, reach out to online customer bases and kick off the lead up to Christmas with strong cashflow.”

ANZ senior economist Adelaide Timbrell said that, while Black Friday sales this year were slightly lower than the 2020 high, retailers had benefited from a similar perfect storm of positive factors.

“Spending was helped by resilient household incomes and high savings rates through the year, due to lockdown conditions, improvements in consumer confidence through November and a lack of opportunity for international — and, in many cases, domestic — travel,” she said.

ANZ found non-food retailing on Black Friday was 2.2 per cent lower than 2020, but still 36 per cent stronger than in 2019.

Ms Timbrell said that fashion sales on Black Friday were stronger than last year, while consumer electronics sales waned a little from their 2020 peak.

Manager of glasses retailer Carolina Lemke Berlin in Sydney, Marina Boaretto, said Black Friday sales boosted sales numbers and said she hoped the lead-up to Christmas would maintain that strength.

“We are expecting for the next two weeks to have great sales,” she told the ABC.

“We are bringing in a new collection as well because we didn’t have much stock before and now new fresh pairs are coming.”

Sales slowed during lockdown but bounced back once restrictions were eased, she said.

“It’s time to be ready for summer, we are here, we’re ready, we are expecting you, please come to see us.”

Spending also jumped after lockdowns ended

Just as Carolina Lemke Berlin experienced, even before the frenzy of Black Friday, the lifting of lockdowns was enough to encourage more retail spending.

October retail trade figures, published by the Australian Bureau of Statistics (ABS) last week, showed a 4.9 per cent increase in turnover, seasonally adjusted.

It was the strongest monthly rise since Victoria’s first lockdown bounce back in November 2020, with retail turnover regaining most of the momentum lost before the Delta outbreak.

ABS director of quarterly economy wide Statistics Ben James said the picture in New South Wales was also positive after the state came out of its lockdowns recently.

“With lockdown ending on October 11, New South Wales sales rose 13.3 per cent, returning to the levels seen in the months immediately prior to the Delta outbreak, while Victoria and the Australian Capital Territory remain below pre-Delta levels,” Mr James said.

Victoria’s lockdown ended on October 22 and its spending for the month rose 3.0 per cent.

The Australian Capital Territory’s lockdown ended on October 15 and spending there rose 20.2 per cent.

“Although sales have bounced back strongly following the end of lockdowns, it is important to note that overall retail turnover has not yet reached the level of May 2021, the month prior to the Delta outbreak,” he said.

Which means there’s probably still capacity for people to keep shopping — something retailers will be hoping for in the lead-up to Christmas.

By business reporter Rachel Pupazzoni (Original ABC Article)