Unemployment down, confidence up
Consumer confidence ticked up a modest 1.0% in the week ending 21 May. The improvement in confidence was broad based, with four out of five indices rising. The index currently sits at 110.5 – somewhat below its long term average.
Households’ expectations towards both current and future economic conditions edged upwards – 0.9% and 0.6% respectively. However, this did little to offset the sharp falls (4.9% and 5.5% respectively) in the week after the Commonwealth budget.
Households’ views towards consumer’s finances a year ago ticked down 0.8%, bringing the index to its lowest value since August 2014. Meanwhile, confidence around future financial conditions improved, rising 1.5% last week. The four-week moving average aggregate financial conditions has edged below its long term average (112.3 vs 112.8).
The ‘good time to buy a household item’ improved for the second consecutive week, up 2.3% last week after a 2.5% rise in the previous week.
ANZ’S HEAD OF AUSTRALIAN ECONOMICS, DAVID PLANK, COMMENTED:
“The modest rise in confidence is quite encouraging, especially given the negative news flow surrounding President Trump and the fall in domestic equity markets. It appears confidence was buoyed by the second consecutive solid jobs report out last week, which included a drop in the unemployment rate.
The decrease in confidence around current financial conditions may reflect concerns around persistently low wage growth in an environment where house price growth is expected to moderate. We will be closely watching what happens to the household saving rate in the Q1 GDP data due to be published in early June. We expect it will rise in response to concerns about weak wages growth.
Looking forward, we expect labour market conditions to continue improving reflecting a period of ‘catch up’ between official and survey-based measures of employment. This should broadly support confidence, although we are unlikely to see a rapid increase given ongoing low wage growth. Additionally, in the near term, confidence remains at risk to any changes in the global political environment.”
