Consumer confidence: weathers the storm

ANZ-Roy Morgan Australian Consumer Confidence bounced 2.3%, partially recovering from the 3.5% fall the previous week. The details were broadly positive, with four out of five sub-indices posting gains.

• Views towards current economic conditions firmed 0.4% after sharp losses in the previous two weeks. While views toward current economic conditions have only stabilised after these falls, they remain above their long term average. Consumers were more optimistic about future conditions, with this sub-index bouncing 6% last week and almost offsetting the 8.8% drop in the previous week.

   

• Views towards current finances jumped 6% bringing the subindex to a six-week high of 110.4. The recovery in sentiment around future conditions was more modest (1.5%), offsetting the 1.3% fall in the previous week.

   

• Sentiment around the ‘time to buy a household item’ continues its downward trend, slipping 1.5% to 133.5. Inflation expectations edged up to 4.5% on a four-week basis.

   

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

   

  “It is encouraging to see confidence recover after being hit by equity market volatility and domestic political uncertainty in consecutive weeks. A broad based improvement suggests that confidence remains supported by strong fundamentals, underneath the weekly volatility.

   

  Following our recent focus on household finances and the headwinds households face, we note that overall financial conditions have moved up last week, driven by a turn in views towards current conditions. This is particularly encouraging given that the RBA has flagged household consumption as a key area of uncertainty in its outlook for 2018.

   

  Though economic conditions have fallen from their peak, some correction was not unexpected given their rapid run up since November. Even now, aggregate economic conditions remain well above their long term average, consistent with a robust labour market and strong activity.

   

  The resolution of events in Canberra may support confidence in the coming week, barring any new triggers.”