After showing encouraging signs last week, headline consumer confidence slumped to 111.1 - its lowest value since October 2015. This was a fall of 2.4% week on week. The four week average now stands at 112.5, falling below its long term average for the first time since February last year.
The fall in confidence was broad based, with four out of the five sub-indices recording declines. Expectations for economic conditions for next year fell sharply, with the index falling by 5.4% to the lowest in this year.
Households’ views towards their current finances fell by 2.8%, while the future finances index was down 2.1%.
The ‘good time to buy a household item’ sub-index rose 0.5%, the fourth consecutive weekly rise. This sub index is currently close to its long term trend.
Inflation expectations remained broadly unchanged, rising 1 bps to 4.4%. The four week average seems to be stabilising around 4.4%, close to the long term trend.
ANZ’S HEAD OF AUSTRALIAN ECONOMICS DAVID PLANK COMMENTED:
“Consumer confidence resumed its downward trend with a notable drop this week, taking the four week average for the index below its long run average.
Underemployment in the labour market has ticked up recently and we may still be some way from a noticeable upturn in wages. This in turn is weighing on household income growth which we believe is one of the reasons behind the downward trend in consumer sentiment. The drop in confidence might also be a reaction to the recent announcement by the APRA to reign in investor lending.
Consumers have been becoming less confident about the outlook for some months. This may be why retail sales were so weak in February. If confidence continues to waver then it seems reasonable to expect additional impacts on consumer spending.”