Business guide to Coronavirus

Businesses to be cautiously optimistic as consumer confidence returns

Many businesses are suffering under the economic impact of the COVID-19 pandemic. However, the latest CommBank (CBA) credit and debit card spend data might point to the beginning of a recovery.

As coronavirus restrictions begin to be eased and almost 5 million Australians start to receive JobKeeper payments, we could see an improvement in consumer confidence.

Government restrictions imposed to control the spread of the outbreak have brought many bricks-and-mortar retailers, service providers and hospitality businesses to a near stand-still. Many businesses have had to stand employees down or let them go all together, with almost one million Australians out of work due to coronavirus. However, there may just be a light at the end of the tunnel.

The CBA credit and debit card spend data for the fortnight ending 1 May may point to the beginning of a recovery. According to Gareth Aird, Head of Australian Economics at CBA, “Total spending is still well down on year-ago levels, but the most recent data suggests that the pulse of spending has picked up across a range of goods and services and across all states and territories.”

While the report reveals that spending over the fortnight ending 1 May is down 10% on the same period last year, it is a significant improvement on the 20% fall recorded in mid-April. 

There are a few positives to take out of this. Firstly, the data suggests that spending momentum is improving from the low point it hit in mid-April. That could mean consumer confidence is returning as we begin to emerge from the worst weeks of the COVID-19 pandemic. 

Secondly, online spending on retail items has increased 110% compared to the same period last year. While restrictions may have kept consumers well away from bricks-and-mortar retail and hospitality outlets through the outbreak, the increase in online spending suggests many consumers are embracing a switch to e-commerce.

But perhaps the best news here is that this CBA data was collected prior to any easing in COVID-19 restrictions. This could suggest the recent easing of some restrictions may show even better results in the next report.

Also, with the JobKeeper payments kicking in earlier this month and more restrictions to be relaxed soon, we might see a further increase in spending in future rounds of CBA data. 

CBA points out that we are in the very early days of a potential recovery and the data remains volatile at this point. A significant increase in new COVID-19 cases could lead to the return of restrictions, which could wield a second blow to consumer confidence and spending. 

Also, it’s probably no surprise that spending in the fortnight ending 1 May is still significantly down in a range of sectors based on the same period last year. Clothing retailers (down 50%) are among the hardest hit, alongside transport operators (down 30%), recreation venues (down 29%), personal care businesses (down 41%), and medical and healthcare providers (down 16%). 

What does all this mean for my business? 

Still, the latest CBA data does give us reason to be cautiously optimistic. The beginning of relaxed restrictions and a steady flow of JobKeeper payments might drive further improvements in consumer spending that may become evident in reports to follow. 

In the meantime, businesses might do well to pay attention to the increase in online retail spending. Expanding your e-commerce offering wherever possible could pay dividends, particularly if an increase in new COVID-19 cases limits a recovery in consumer spending in the coming weeks and months. 

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