ANZ-Roy Morgan Weekly Consumer Confidence fell 3.1% last week to 110.4 – the lowest level in four months.
The ANZ said that the key driver “was a sharp decline in confidence in the economic outlook, likely reflecting the weak GDP data and media focus on the government’s economic management last week”.
Driving the big fall was the crash in “confidence in the economic outlook over the next year (-7.8%) and next five years (-8%)”.
This is important because it communicates something very telling about the behavioural and psychological bias of consumers. According to the ANZ:
Levels of both sub-indices were subdued even before the fall last week, and are likely contributing to the unusual sensitivity of households to negative economic newsflow. This has previously caused three sizeable drops in confidence this year in response to job losses in the aviation and manufacturing industries, Federal budget cuts, and a surge in the unemployment rate (later revised).
ANZ chief economist Warren Hogan believes there shouldn’t be a rate cut because it spook consumers more than encourages them.
“We think a key question for monetary policy right now is would rate cuts help build confidence or generate more concern and uncertainty about the future of the economy,” Hogan said.
“Today’s number suggests that it may be the latter. We will be watching the weekly numbers closely over the Christmas shopping season to gauge the momentum the economy will take into 2015.”
I’d struggle to agree with that as the RBA could easily justify it as a move to help ease the Aussie dollar lower, aid the recovery and ease the economic transition into sectors outside the housing market.
This weekly data is as volatile as weekly data might be expected to be, particularly in some of the sub-indices. But there is no denying that on balance this is not good news for the economy or retailers and while the NAB Business Survey is the primary focus today, this confidence data suggests that a rate cut is certainly on the way in Q1 2015.