After three straight weeks of falls, consumer confidence rose 1.6% in the week ending 26 March. The four week average continued to fall, however, and is now back to early 2016 levels and close to its long run average.
The pickup in confidence was broadly based with four out five sub-indices posting gains. Households’ views of the 12-month economic outlook rose 2.7% last week, after a 3.3% fall the previous week. Consumers were also more confident regarding future economic conditions, with the index rising a solid 2.8%.
Households’ views towards their current finances fell slightly (-0.9%) last week, while the future finances index rose a solid 3.0%.
The ‘good time to buy a household item’ sub-index rose 0.5%, building on the 1.7% gain over the previous two weeks. This sub index is currently close to its long term trend.
Inflation expectations ticked up partly reversing the previous week’s sharp fall. The four week average is now at 4.4%, well above the low of 3.8% seen in October last year.
ANZ’S SENIOR ECONOMIST FELICITY EMMETT COMMENTED:
“The broad-based improvement in confidence last week is encouraging, particularly given the fall in domestic equity prices early in the week and uncertainty surrounding US policy. Stepping back from the weekly numbers, confidence has been trending down since late January and is now back close to its long run average.
We expect that at least some of the recent decline in consumer confidence relates to the weak outlook for wages growth (including the mooted cut to penalty rates), as well as the rise in unemployment. With wages growth persistently low and spare capacity in the labour market still elevated, there is a risk that households are becoming less confident about the medium term outlook for income growth in an environment of high household debt. If this is the case, this could pose a downside risk to the spending outlook. In this regard, the evolution of consumer confidence will be important to gauge the prospects for consumption growth.”