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Strong retail figures make it Gerry Harvey 1, Amazon and the media 0

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Expert doomsday merchants got a timely reminder of how wrong they have been for some time, with retail numbers coming in shockingly high in November. And it makes me wonder, will any media experts say sorry to Gerry Harvey?

Remember, retailers of Harvey Norman and JB Hi-Fi were supposed to be devastated by Amazon but the likes of Gerry kept telling us that he had the threat covered.

Back last February, HVN was a $5.15 stock but with negative views on retail,  Aussie consumers and the looming black cloud called Amazon dominating expert commentary, Gerry’s share price slumped to $3.65 by early November.

But anyone who was a Gerry-believer or believed me when I argued that the Oz economy is getting better faster than many economists and other ‘experts’ were arguing, has seen HVN’s share price climb to $4.39. Let me do the maths for you — that’s a 20% gain! Go Gerry!

I bet his chuckling right now with his beloved Magic Millions gee-gee auctions and race day on this week.

Adding credibility to this share price spike was November’s retail figures, which were the best in four and a half years. Sales in the shops and online rose by 1.2% in November after increasing by 0.5% in October, and that’s the strongest outcome in 4½ years. 

Another reason for Gerry and JB’s boss, Richard Murray to smile was the fact that spending rose across all states and territories, led by electrical and electronic goods, together with household and other retail goods.

Of course, this is early days with the arrival of Amazon just starting and it will take time for this internationally strong online retailer to start eating into the locals’ market shares and that’s why I was always pondering on my Sky News Business program why the market was so negative on two of the best retail businesses ever.

Well, true believers in our retail giants are getting their rewards now but undoubtedly, over time, Amazon will hurt their businesses but we underestimate Gerry and Richard at our peril. These guys have customer loyalty and geographic closeness to their customers, so the battle will be intriguing.

Away from this retail stoush, the recent run of economic data continues to support my view that our economy is set for a good 2018 and, if I’m right, the stock market should also deliver nice returns.

Let me give you some economic catch up facts in case you’ve been in holiday mode:

  Job vacancies rose by 2.7% to a record 210,300 in the three months to November. Job vacancies are up 16.1% on a year ago – the strongest annual growth rate in 7 years.

• Approvals by local councils to build new homes rose by 11.7% in November, after falling by 0.1% in October. It was the strongest monthly outcome in 12 months. In trend terms, approvals rose for the tenth straight month, up by 0.9%.

• The weekly ANZ/Roy Morgan consumer confidence rating rose by 4.7% to 122.0 last week - the highest level in four years and well above the long-run monthly average of 112.9.

• According to the Federal Chamber of Automotive Industries (FCAI), new vehicle sales hit a record high of 1,189,116 units in 2017, up 0.9% on a year ago.  

The CBA Purchasing Manager’s Index (PMI) for the services sector rose to 55.1 in December from 54.0 in November. The index is at 5-month highs. 

• The Australian Industry Group (AiG) Australian Performance of Services Index (PSI) increased to 52.0 in December from 51.7 in November. The index remains over 50, signifying expansion of the services sector.

Over the year to October, the proportion of occupied seats on domestic flights hit a 6-year high of 79%. Load factor on the Sydney-Melbourne route was at record highs.

• International passenger traffic to Australian airports rose by 4.5% to 3.37 million in October, up from 3.226 million a year ago.

 • Job advertisements declined in December, falling by 2.3% to 167,656 ads, after rising by 1.1% in November but December is not a great month for new hiring but, for the year, job ads are up a healthy 10.8%.

Right now, more and more economists are jumping on the “wages will rise more strongly in 2018” bandwagon and business investment expectations are also beating the forecasts of those who have difficulty believing that the sun will shine every morning!

Go Gerry and the Oz economy and get ready for a great 2018!

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Published: Friday, January 12, 2018


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