Confidence slips on wage concerns

ANZ-Roy Morgan Australian Consumer Confidence fell a sharp 3.8% last week – largely offsetting the gains over the previous two weeks. The weakness was broadly based – with a sizeable decline in households’ perceptions of the economic outlook driving the deterioration in sentiment.

• After two consecutive weeks of improvement, consumers’ views towards current and future economic conditions dipped, down 8.1% and 7.2% respectively. The average of these two measures – households’ confidence in the economic outlook – is at its lowest level in 16 weeks (Figure 3).

   

• Households’ views towards current financial conditions slipped 0.3% last week. Partially offsetting this weakness, sentiment around future financial conditions rose a solid 3.7%. Looking through the weekly volatility, confidence in overall financial conditions has remained broadly unchanged over the past two months, hovering around its long term average (Figure 3).

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  Consistent with the fall in views towards economic conditions, the ‘time to buy a major household item’ index dipped 7.6% last week, down to the lowest level in almost two years.

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  Inflation expectations were unchanged at 4.4% on a four-week moving average basis.

ANZ’S HEAD OF AUSTRALIAN ECONOMICS, DAVID PLANK, COMMENTED

“Despite the solid Q2 GDP reading last week, confidence has failed to hold onto the previous week’s gains. The decrease in confidence around the economic outlook may reflect concerns around persistently low wage growth in an environment where house price growth is expected to moderate and household debt remains high. The Q2 GDP data showed the rise in consumer spending was largely supported by a lower saving rate – while wages and overall household income growth remained very weak.

Looking forward, we expect labour market conditions to continue improving given the strength in job ads and business conditions. This should broadly support consumer confidence, although we are unlikely to see a material increase until wages growth starts to pick up more meaningfully.”