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Australian Markets Weekly: which states are performing best and why?

Analysis

• The coronavirus has had very large and significantly varying impacts on different businesses and different sectors of the economy with most, but not all, businesses and sectors significantly negatively affected. We’ll look at the sectoral impacts in more detail in coming weeks, but this week we thought we would look at how the various Australian states were performing as there are some relative winners and losers emerging, though of course overall there has been a significant net negative impact reflected in sharply higher unemployment across the nation.
• At this stage, it looks like Victoria and the ACT are underperforming, while at the other end of the scale, WA and the NT so far appear to be recovering best.
• Our analysis suggests the tiering of the states reflects a combination of the impacts of: (i) (most importantly) spread/control of the virus (Victoria the worst and the smaller states the best); (ii) reductions in international mobility/the impacts of international border closures (impacting on immigration, international tourism and international students) – NSW and Victoria are relatively the most impacted, along with Canberra/the ACT; (iii) reductions in domestic mobility/working from home – this impacts CBDs and businesses providing services to CBDs, though some offset is likely through activity picking up in suburban areas. The outperformance of WA and the Northern Territory may also reflect their relatively large exposure to mining and farming, two sectors that relatively have not been hit as hard.

The week ahead

• Australia: Q2 CPI is on Wednesday and NAB sees Headline CPI falling a sharp 2.0% q/q to -0.4% y/y, consensus also -2.0% q/q, with the fall due to pandemic related government subsidies, rate/price freezes and a sharp fall in petrol prices. The RBA’s preferred underlying Trimmed Mean measure will also be very soft at 0.0% q/q and 1.3% y/y (consensus a touch stronger at 0.1% q/q). Payrolls on Tuesday is likely to garner more focus than usual given today’s COVID-19 Household Survey showed a sharp 1% decline in employment. There is also a plethora of other data including Consumer Confidence on Tuesday, Building Approvals on Thursday along with the COVID-19 Business Survey, and finally Credit on Friday.
• International: CH: Official PMIs are on Friday and will be closely watched for whether the tentative strength seen in the non-manufacturing PMI last month continues. US: All focus on a follow up fiscal package. Datawise it is a huge week with the FOMC on Wednesday, Q2 GDP on Thursday and key earnings reports (Facebook on Wednesday, Alphabet, Amazon and Apple all Thursday). Jobless claims will also be watched closely given last week’s worrying rise. EZ: German IFO later today and then Q2 GDP figures on Friday along with a flash Core CPI for July. UK: a quiet week data wise. For full details please see our What to Watch publication.

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Chart of the week

Job ads bounce the most in WA and the NT

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