Australian consumer confidence fell last week, as jitters on global markets drove a sharp decline in consumers’ views towards the economy.
The ANZ-Roy Morgan weekly survey of consumer confidence fell by 2.6% to a reading of 119.5, reversing its gains over the previous two weeks.
“Given the tumble that global and domestic equities took last week, it is unsurprising to see confidence falter,” said David Plank, ANZ’s head of Australian economics.
“In particular, views around current economic conditions fell sharply last week (down 6%), though they remain well above their long term average.”
Households were less optimistic about their finances, as the view towards financial conditions over the next 12 months fell by 2.6%.
Taking a step back from the weekly volatility, Plank said the survey showed consumer confidence in Australia had enjoyed a broad uptrend since Q3 2017.
However, that increase has largely been driven by more optimism towards the broader economy, while household budgets remain constrained.
Not only has the reading for views towards financial conditions risen more slowly than economic conditions, it’s also recently begun to deteriorate.
“This likely reflects the lack of pass through (yet) to wages, despite strong employment growth,” Plank said.
“Together with moderating house prices and high levels of debt, household finances remain under pressure.”
Plank highlighted last Thursday’s speech from RBA governor Philip Lowe, which made it clear the central bank is in no rush to raise interest rates.
Lowe’s speech was the catalyst for ANZ to reverse its call for a further two rate rises in 2018.
“The upcoming employment and wage numbers will likely set the tone for confidence over the coming weeks. Further financial market volatility may also have an impact,” Plank said.
In view of that, next Wednesday’s quarterly wage data from the ABS is undoubtedly the most important release on Australia’s near-term data calendar.
This morning’s NAB business survey for January (11:30am AEDT) will provide a leading indicator as to whether Australian companies are noticing more upward pressure on wage costs.