Australian consumer confidence fell modestly last week, snapping the improvement seen since the beginning of March.
The latest ANZ-Roy Morgan consumer confidence index reading fell 0.3% to 116.0. Despite the modest weakness, the index still remains 3% above its long run average of 112.7.
A sharp fall in sentiment towards personal finances in the year ahead, along with a slight pull back in whether now was a good time to buy a major item, helped to offset improved readings towards the economic outlook and current personal finances.
“In contrast to the recent trend, households’ views towards their own finances fell a solid 3.0% last week as confidence in the 12-month outlook fell 5.7%. Slightly offsetting this was a small rise (+0.4%) in households’ views towards their current personal finances,” said ANZ.
“On the other hand, confidence in the economic outlook rose this week, continuing the steady improvement over the past six weeks. The subindex on ‘economic conditions in the next 12 months’ rose 3.3% and is now sitting just a touch below its long run average. The subindex on ‘economic conditions in the next 5 years’ also improved, rising 2.7% last week.”
Felicity Emmett, ANZ’s head of Australian economics, suggests the fall in Australia’s unemployment rate in February, along with continued strength in Australia’s stock market, helped to underpin gains seen in prior weeks.
“At current levels, confidence looks quite healthy and is above its long run average,” says Emmett.
“The improving labour market is likely to be an important factor supporting confidence. Last week’s news that the unemployment rate dipped back to 5.8% was particularly encouraging. Moreover, equity markets continued to recover from their February lows and petrol prices remain low.”
Looking ahead, the upcoming federal budget — now scheduled for May 3 — along with the potential for a double dissolution election in July, will likely dictate confidence levels over the short term in Emmett’s opinion.
“The government’s decision to bring forward the Budget has brought it into the spotlight, along with the prospect of a double dissolution election. The news flow around both these events over the next few months is likely to play an important role in shaping consumer confidence,” said Emmett.
Here’s the long-term chart of changes in consumer confidence, supplied by ANZ.