Aussies Cut New Year Spending as Omicron Spread Sparks Caution

(Bloomberg) -- Australian households are already spending less as the fast-spreading omicron variant keeps shoppers at home and squeezes remaining demand through supply and staff shortages, sparking a slew of forecast downgrades from economists. 

Weekly data from ANZ Banking Group showed nationwide spending across dining, retail and travel falling in the week to Jan. 5 to the lowest level since last year’s lockdown, senior economist Adelaide Timbrell wrote in a note Friday. 

In Australia’s biggest city, Sydney, expenditures slumped to the weakest since the start of the pandemic, Timbrell added, driven by record-breaking omicron cases. 

“Caution about being in public places is being compounded by staff shortages to stifle spending,” Timbrell said. She didn’t disclose the numbers on which the bank based its conclusions about spending.

Early signs suggest a pullback in private consumption, which accounts for roughly 60% of the country’s $1.5 trillion annual economic output, is likely to weigh on gross domestic product growth this quarter with economists from Goldman Sachs to Nomura slashing forecasts. 

However, there’s still no shift in the prevailing view that the Reserve Bank will taper or end its A$4 billion ($2.9 billion) per week bond purchases at its meeting next month.

Australia’s most-populous state suspended non-urgent surgeries and introduced fresh curbs on socializing on Friday, as the government tried to ease pressure on its health system caused by skyrocketing Covid-19 cases.

The new restrictions and growing concern over the spread of infections are likely to further weigh on the spending patterns outlined by ANZ, as will continued shortages of supplies and workers.

Australia’s biggest supermarket operator Woolworths said it is experiencing Covid-driven staff absences of 20% at its distribution center and 10% at its stores. 

Australian Container Freight Services, one of Australia’s largest trucking companies, has said there has been a 25-50% shortage of drivers across the east coast in the past two weeks. Coles, Australia’s second-largest supermarket operator, imposed temporary food purchase limits this week.

Capital Economics warned of “consumption stagnation” in the March quarter, predicting flat first-quarter consumer spending growth from a previous forecast for a 1.5% rise. 

“Perhaps a bigger headwind to the recovery are mounting problems on the supply side as a rising number of workers are forced to isolate,” said Marcel Thieliant, senior economist at Capital Economics.

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