Release spending spree figures, now

Spending on home improvement has confounded all the expectations of late March and early April. Picture: Tony Martin

The incredible month of May has ended. We have documented the suffering but now the nation and its governments, plus share markets, desperately need to know just how big the sales boom in home improvements, appliances and related industries has been.

The government is making important decisions on what assistance is required in the post-JobKeeper world, and in filling the gaps, so need this information.

Indeed The Australian reports that the government, in ignorance of the boom, plans to add home renovations (which are starting to rise) to its much needed stimulation of new homes. I find myself almost alone in relaying to Canberra and markets that there is an industry boom taking place of enormous proportions.

I discovered the boom from talking to those linked to major stores like Bunnings, Harvey Norman, and JB-HiFi’s The Good Guys, who are experiencing a very strong rise in sales that confounds all the expectations of late March and early April.

Last month I estimated the rise in home improvement sales at between 10 and 30 per cent.

But since then I have been told by the manager networks that I have “done a reverse JobKeeper” and underestimated the enormity of this spending spree by Australians.

Sales rises in May of between 40 and 50 per cent have been experienced in many stores but my sources are untested. While the CEOs of the major companies involved understand there has been a boom in sales, they want it fully quantified and many don’t know exactly what’s happened to profits during May.

So, in the next few days, proverbially, they will be pacing up and down the carpet outside the chief financial officer‘s abode waiting for the May profit calculation.

During the past half century I have written about countless booms and busts but always started with the confirmed situation that there has been a boom or a bust.

This time the scene is totally confused because retailers outside the home area are collapsing and there are vast areas of suffering, particularly in hospitality, tourism entertainment and similar areas.

And the boom has not been acknowledged by any of the major companies involved and indeed Wesfarmers announced the closure of many Target stores last month and did not mention any increased activity in its Bunnings arm and possibly in Officeworks operations.

Those regulating the nation need to understand what has actually happened in May.

It would seem that the share market has a whiff, partly as a result of my commentaries, and that contributed to last week’s major advance.

But the markets are entitled to know the truth rather than simply rely on what I can discover from the manager network. Accordingly, if the major companies involved don’t quickly release details of what has taken place in the six weeks after Easter, then the ASX should demand disclosure.

The managers of the major store network have tried to get a handle on the forces that have driven so many Australians to buy homewares, appliances and home maintenance goods as though their life depended in it.

The most obvious answer is that there has been a huge injection of money into the community and there’s nowhere else to spend it.

State governments have virtually quarantined most of the other spending activities.

At the same time Australians are spending much more time at home so their attention has been focused on shortcomings in their living abodes.

Australians who have maintained their income include many Baby Boomers who have educated their children and have money at the ready but few places to spend it.

But the forces go much further. Never before have Australians been cooped up in their homes unable to have direct communication with people apart from via their computer or phone. My guess is that a lot of Australians are simply spending money as a result of “isolation”, which may have triggered spending on a scale more akin to what happens in a widespread economic boom.

Many Australian appear to have been spending on getting connected.

In time we will discover to what extent the money simply represents spending by people who have income but nowhere else to spend it, or whether it is a deeper movement where people who really couldn’t afford to increase their outlays on home equipment did so because of easy credit and in a reaction to isolation. As well, a lot of casual employees are enjoying higher income via JobKeeper.

But first we need to know exactly how big this boom has been and whether it truly is in a monumental event.

In terms of the profit calculations being undertaken by CFOs, most stores report that the Chinese and other overseas suppliers have not been increasing their prices in reaction to the lower Australian dollar, so that helps margins.

Naturally there have been some increases in staff levels, but the magnitude of the boom means that margins should have been held or increased because discounting was limited.

Of course, May traditionally is not a good month and doesn’t rank with the peak pre-Christmas trading period.

The pressure from CEOs and board members for the profit numbers will increase as the first week of June comes to an end.

And again, chief executives need to convey that information to the markets as soon as possible. And the huge advertising of Harvey Norman and The Good Guys over the weekend indicates that they hope the action will continue in June.