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The New Year bounce unwinds

After a solid start to the New Year, consumer confidence slipped 1.9% to 117.0 in the week ending 22 January. The fall was broadly based with 4 out of 5 subindices posting modest declines. Encouragingly, consumers’ views towards current finances edged up 0.7%.


  • Households’ views towards their future finances fell 3.0%, reversing previous gains and falling to its lowest value in five weeks. Even so, both indicators of finances remain well above their long run averages.


  • Households’ views of economic conditions over the next 12 months declined 2.0% after rising 11.2% over the previous two weeks. Households’ views of economic conditions over the next five years fell 2.4% after a 2.8% rise over the previous two weeks.


  • The post-Christmas bounce in household views on whether ‘now is a good time to buy a household item’ has been short-lived, with this sub-index down 2.5% in the week.


  • The four week moving average in inflation expectations edged higher for the third consecutive week, up to 4.4% last week from 4.0% in mid-December.




    “The new year jump in consumer confidence partly unwound last week, likely reflecting the end of the traditional holiday season and perhaps the fall in domestic stock prices. Recent headlines about Brexit and ongoing uncertainty about the impact of a Trump presidency may also have impacted.


    Even so, the headline index remains quite robust, and encouragingly, households’ views of overall financial conditions remain well above the long term trend, suggesting a positive outlook for consumer spending.

    Heading into the Q4 inflation report this week, inflation expectations have been trending higher. However, this likely reflects an increase in petrol prices rather than a broad-based increase in inflationary pressures”.


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