What slowdown?  Seven things we learned about consumers this week

What slowdown? Seven things we learned about consumers this week

While there has been valid evidence of airline price gouging, perhaps the bigger message to business lies in consumer spending priorities – travelers may be unhappy with what they are paying, but they still fly in large numbers.

In addition, Qantas appointment bookings extend well into next year. While there’s an element of frugality in that cheaper flights are possible through advance booking, it also suggests that many consumers are confident enough to plan their finances into 2023.

Harvey Norman Chief Executive Gerry Harvey was usually blunt about how the economy is doing at his annual general meeting on Thursday: We’re nowhere near a recession.

The group’s same-store sales rose 6.3 per cent in the four months to October, with wetter and cooler weather (which has impacted sales of air conditioning and outdoor furniture) being Harvey’s biggest concerns.

Perhaps most interesting was his comment on conditions in rural areas, where 65 percent of the group’s stores are located. Though Harvey expects some slowdown in 2023, he says strong conditions in mining and agriculture will support the chain’s sales in the regions.

online retailer Kogan.com is in a more difficult position as gross sales fell 38.2 percent in the first four months of the fiscal year and the group posted a small loss for the period.

But this looks more like a company specific issue; The shift away from online retail and back to physical shopping has accelerated since COVID-19 restrictions were lifted earlier this year, and Kogan.com’s profits have been hurt by an inventory build-up that has forced it to stock up to clear lower profit margins.

That inventory is beginning to look more manageable, giving Kogan.com room to improve margins.

Friday brought another sign of strong consumer demand from the luxury car group auto sport groupthat said it expects earnings for the six months to December to be between 22 percent and 28 percent above last year, thanks to strong demand and a healthy backlog after two years of vehicle shortages.

logistics giant Dice also got off to a good start in fiscal 2023, with revenue, earnings and margins exceeding all internal expectations for the four months to October. The secret of this strong start to the year? Higher volumes and Qube’s ability to command higher prices.

While weather and labor relations were an issue, Qube’s overall impression was of an improving picture in terms of supply chain disruptions as demand continued to rise. Again, there is little to suggest that consumer demand – or consumers’ willingness to pay higher prices – is slowing down.

assure QBE tells a similar story to Qube. Not surprisingly, Australia’s bad weather was bad news for claims across the insurance industry. But QBE has no problem enforcing rate increases: Gross written premium rose 6 percent in the September quarter, or 13 percent on a constant currency basis. Premiums in the Asia-Pacific region (of which Australia accounts for the largest share) increased by 9.4 per cent.

If there was a note of caution this week, it came from Bluescope steelthat said its shipments in Australia and New Zealand have fallen in recent months as interest rates and falling house prices weigh on the property market.

Bluescope’s experience isn’t surprising given its proximity to the real estate sector, which is the fastest to feel the pain of higher interest rates. But can we take this as a canary in the consumer coal mine?

Yes and no. Surely any drop in consumer spending will be linked to a surge in mortgage payments, which is just beginning – Commonwealth Bank chief executive Matt Comyn says banks have only endured about 50 percent of the rate hikes the RBA has delivered this year, and will rise to 70 percent by March. The peak of borrowers moving from very low fixed rates to much higher variable rates will occur at a similar time.

Still, it’s worth noting that savings pools remain high in Australia and the majority of borrowers are up front on their mortgages.

Bet on any consumer pains emerging after Easter next year, with that fabled “tipping point” more likely in the second half of 2023.

#slowdown #learned #consumers #week

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