Consumer confidence: recovery after a stumble

Headline consumer confidence jumped by 3.3% last week, more than reversing the previous week’s fall. The four week average climbed 0.4ppt to 112.9 to be in line with the long term trend.

• Increases were observed across the board, with households’ views towards their current finances registering a gain of 5.2% to 107.0, the highest since February. Views about future finances also improved by 1.4% to 123.9.

   

• Expectations for economic conditions for next year increased by 3.5% on a weekly basis, as did expectations for economic conditions in the next five years (2.6%).

   

• The ‘good time to buy a household item’ sub-index increased by 4.3%, to above its long term trend.

   

• Inflation expectations were largely unchanged at 4.3%, with the four week moving average holding steady at 4.3%.

   

  ANZ’S HEAD OF AUSTRALIAN ECONOMICS DAVID PLANK COMMENTED:

   

  “Consumer confidence picked up last week, reversing the recent trend. The rise pulled the four week moving average up to be on par with its long run average.

   

  We suspect that solid fundamentals reasserted their influence last week, after the dampening impact of the Queensland floods in the previous week. The strength in the housing market is likely providing some support to confidence, with house prices continuing to rise quite strongly and buoyant auction clearance rates suggesting that prices may not yet have peaked. Ongoing elevated unemployment and persistent weakness in wage growth, however, will continue to weigh on consumer confidence in our view.

   

  While last week’s pick-up in sentiment is encouraging, we remain of the view that spending growth is likely to remain constrained in a low wage environment, consistent with the recent softness in retail sales.”