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Consumer confidence: declining, again

The headline consumer confidence fell 1.9% last week partly reversing the previous week’s gain. This dragged the index back down below its long run average.


  • The performance of the sub-indices was largely negative with only one of the five sub- indices recording a rise. Households’ expectations for economic conditions next year fell 1.9%, while expectations for economic conditions over the next five years dropped a sharp 4.1%, to be at its lowest level since September 2015.


  • Households’ views towards their current finances fell a modest 0.7%, while views about future finances improved 2.7%, to the highest level since February.


  • The ‘good time to buy a household item’ index registered a sharp 5.1% drop, following five consecutive weekly gains.


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




    “The drop in headline consumer confidence comes despite the strong labour market report released last week and ongoing strength in the housing market. Rising geopolitical risks, however, have impacted the local share market and are likely feeding through to households’ concerns about the economic outlook.


    Moreover, the RBA’s focus and the associated media spotlight on the exuberance in house prices in Sydney and Melbourne as well as high levels of household debt is possibly feeding into concerns about the outlook. For some time, we have worried that households could decide to rein in consumption growth in response to the combination of low wage growth and rising household debt. The recent decline in confidence and the weakness in retail sales suggest this may be occurring.


    In our view, a reassertion of the downward trend in the unemployment rate along with some improvement in wage growth will likely be required to materially lift consumer confidence.”


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