What results from Qantas, Harvey Norman, Kogan.com, Autosports Group, QBE and Bluescope Steel tell us about the economy

Although there have been justifiable suggestions of price gouging by the airlineperhaps the bigger message on the economy is around consumer spending priorities – travelers may be unhappy about what they have to pay, but they’re still flying in massive numbers.

Further, Qantas’ forward bookings are pushing well into next year. While there is an element of frugality to that given cheaper flights can be had by booking in advance, it also suggests plenty of consumers feel confident enough about their financial position to plan holidays into 2023.

Harvey Norman executive chairman Gerry Harvey was typically blunt about how the economy is traveling at his AGM on Thursday: We’re nowhere near a recession.

The group’s same-store sales rose 6.3 percent in the four months ended October, with wetter and cooler weather (which has affected sales of air conditioners and outdoor furniture) Harvey’s biggest problems.

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

Online retailer Kogan.com is in a tougher spot, with gross sales in the first four months of the financial year down 38.2 percent and the group posting a small loss for the period.

But this looks like more of a company-specific issue; the shift away from online retail and back towards physical shopping has been building since COVID-19 restrictions were lifted earlier this year, and Kogan.com’s profits have been damaged by a buildup of inventory that has forced it to clear stock at lower profit margins.

That backlog of stock is starting to look more manageable, giving Kogan.com scope to improve margins.

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

Logistics giant Qube has also enjoyed a good start to the 2023 financial year, with revenue, earnings and margins all ahead of internal expectations in the four months to October. The secret to this strong start to the year? Higher volumes and Qube’s ability to push through higher prices.

While weather and industrial relations disruptions have been an issue, the general sense from Qube was of an improving picture around supply chain disruptions, with demand still elevated. Again, there is little to suggest that consumer demand – or the willingness of consumers to pay higher prices – is cracking.

Insurer QBE tells a similar story to Qube’s. Unsurprisingly, Australia’s awful weather has been bad news for claims across the insurance industry. But QBE is having no problem pushing through price rises: 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 is the largest chunk) rose 9.4 percent.

If there was one note of caution this week, it came from Bluescope Steelwhich said its deliveries in Australia and New Zealand had drifted lower in the past few months, as interest rates and falling house prices take a toll on the property market.

Bluescope’s experience is not surprising, given its proximity to the housing sector, which feels the pain from higher interest rates the fastest. But can we take this as a canary in the consumer coal mine?

Yes and no. Certainly any drop in consumer spending will be related to a jump in mortgage payments, which is only getting started – Commonwealth Bank chief executive Matt Comyn says banks have only passed through about 50 per cent of the rate rises the RBA has delivered this year, and will get to 70 percent by March. The peak in borrowers coming off very low fixed rates and shifting to much higher variable rates will occur at a similar time.

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

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

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