Consumer confidence: still above average

ANZ-Roy Morgan Australian Consumer Confidence slipped 0.6% last week to 115.1, effectively unwinding the 0.7% gain in the previous week, but remaining above its long run average. The details were mixed; sentiment around financial conditions declined, but the remaining indexes posted small gains.

• Households continue to remain upbeat about both current and future economic conditions, with the subindices up 0.9% and 0.8% respectively. In four week moving average terms, views towards current economic conditions are at their highest point since late 2013.

   

• Views towards current financial conditions fell 2.7% last week, more than reversing the 1.7% gain previously, and bringing the subindex to a 6 week low. Views towards future financial conditions also deteriorated, falling 2.8% last week. Even so, both subindices currently sit above their long term averages.

   

• Sentiment around the ‘time to buy a household item’ rose 1.1% last week while inflation expectations were stable at 4.5%.

   

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

   

  “Households’ views towards overall economic conditions have improved substantially over the last two months, supported by a strong labour market and accommodative monetary policy. However, confidence in financial conditions, particularly in the near term, remains under pressure. This reflects several headwinds that consumers face, particularly high household debt and persistently weak wage growth.

   

  Still, the overall improvement in sentiment holds out the prospect for a stronger gain in consumer spending in the current quarter after growth of just 0.1% in household consumption in the September quarter. The bounce in retail sales in October suggests this may be the case.

   

  While we expect a lower-than-consensus number for employment growth out later this week, this reflects our view that official numbers have overshot leading indicators, rather than a softening in conditions. Overall, labour market conditions remain solid and will likely continue to support confidence in the near term.”