Consumer confidence increased for the second straight week – up 1.5% to 112.2, bringing the index back to levels before the Commonwealth Budget. The improvement in confidence was mixed – sentiment towards financial conditions deteriorated somewhat, while views around economic conditions rose solidly.
Households’ expectations towards both current and future economic conditions bounced last week (3.5% and 4.6% respectively), after posting modest rises the previous week. Sentiment towards current economic conditions is at its highest value in seven weeks.
Households’ views around current financial conditions were broadly flat (-0.1%). Meanwhile views towards future conditions dropped 1.7%, offsetting the 1.5% rise in the previous week. Confidence in overall financial conditions has fallen sharply since the Commonwealth Budget, unwinding the modest recovery in April.
The weekly inflation expectations series dropped sharply to 4.0% last week, bringing the 4-week average to 4.3%.
ANZ’S HEAD OF AUSTRALIAN ECONOMICS, DAVID PLANK, COMMENTED:
“The rise in confidence, in particular the improvement in views around economic conditions, likely reflects the improving labour market conditions. Even as the headline index improves, the ongoing weakness in sentiment around financial conditions is worrying – not in the least because of its strong correlation with consumer spending.
In our view consumer confidence is likely to improve further over the next few months, albeit slowly, as elevated business conditions feed into stronger labour market conditions. That being said, confidence may be volatile over the next few weeks given the flow of data culminating with the Q1 GDP release as well as evolving global political conditions.”