Australian consumer confidence climbed again last week as Aussie households took a much more positive view towards the broader economy.
The ANZ-Roy Morgan Consumer Confidence index climbed by another 2.9%, and is now at its highest level since February this year.
Last week’s reading of 118.4 is well above the long-term average of 112.9:
While views towards current and future household finances both slipped last week, that was more than offset by a huge shift in sentiment towards Australian economic conditions.
Views towards current economic conditions jumped by 12.3%, following a hefty 7.9% increase the week before.
The reading for that sub-index is now back above the long-term average and at its highest level since 2013:
Views towards future economic conditions posted a similarly impressive 8.2% gain, after a 2.7% increase in the week prior.
ANZ chief economist David Plank again cited the recent strength in employment as a key driver of sentiment, and said the recent strength in the Aussie dollar may also have played a role.
“Confidence has staged an impressive recovery from its recent low and has reversed most of this year’s decline. The rise is likely related to strong full-time jobs growth, and the fall in the unemployment rate since the start of the year,” Plank said.
“It is also possible the stronger AUD has played a role in the move higher. On occasion there is some correlation between the two, though the relationship is volatile and may reflect the influence of other factors rather than being causal.”
Unfortunately, consumer sentiment towards the broader economy wasn’t matched by households’ views towards their financial situation. Sentiment towards current financial conditions fell by 1.2% to almost offset last week’s 1.8% gain.
Views towards future financial conditions fell for the second straight week, dipping by 0.9%. It suggests that consumers are still feeling the effects of low wage growth and high household debt, combined with the introduction of higher energy prices on July 1.
Plank highlighted similar headwinds in his outlook based on the latest results.
“Going forward, it will be interesting to see if the upswing in confidence translates into higher spending. While the two are usually well correlated and recent retail sales data has been positive, we believe that sluggish wage growth, slower growth in house prices and the high level of household debt are likely to remain a drag,” Plank said.
ANZ expects the RBA to keep the official cash rate on hold today at 1.5%, but sees broader economic risks as less skewed to the downside given the recent strength in employment and a mild increase in underlying inflation.