Australia’s demolition of the English in the recent Ashes series was not just enjoyable for those watching at the ground.
According to ANZ, it may have helped lift consumer confidence to the highest level in over four years.
Good one, Smithy.
Its Australian Consumer Confidence Index, produced in conjunction with Roy Morgan, jumped 4.7% to 122 last week, leaving it at the highest level since late 2013. That just happened to be when Mitchell Johnson was terrorising the English batsmen in the last home Ashes series held in 2013/14.
Just look at the chart below showing the change in confidence levels since the start of 2012. It’s going up nearly as fast as Steve Smith’s batting average.
“ANZ-Roy Morgan Australian Consumer Confidence starts the year on a high as the festive mood carries on to 2018,” said David Plank, head of Australian Economics at ANZ. “Continued strength in the labour market, and a strong performance in the Ashes series, likely helped sustain the cheer among consumers.”
While confidence levels tend to lift earlier in the year when the vast majority of Australians are on holidays, Planks says even by unusual standards, the gain this year was substantial.
“It needs to be acknowledged that consumer confidence usually rises in the first reading for January,” he says.
“Still, the increase this year is stronger than the 3.6% average lift in confidence for the past nine ‘annual turns’, indicating that the gain in confidence is more than just seasonal.
“Confidence has been trending higher since the low for 2017 in late August.”
Plank says that it’s encouraging that “consumers seemed willing to overlook their high debt burden, moderating house price gains and the impact of higher petrol prices”.
“We think the continued strong growth in employment is the key driver. We’ll find out in February when the next wages data is due whether a pick-up in wage growth has also contributed to the gain in sentiment.”
Explaining the lift in the headline index, ANZ said all five survey subindices rose last week, led by strong improvements in sentiment towards household finances and the economy.
“Consumers remained optimistic about financial conditions, which rose to the highest since early 2017. Both current and future financial conditions registered gains, rising 5.8% and 4.2% from last reported respectively,” Plank said.
“Economic prospects were also perceived to be much better. Current economic conditions rose 5.2% from last reported to 113.7, the highest since September 2013, while future economic conditions increased by 4.2% to 115.2.”
The final component within the survey — whether now was a good time to buy a household item — also rebounded, jumping 4.4%, offsetting a 1.2% fall in the final survey of 2017.
The strength in this component and the future financial conditions subindex is a good sign for household spending levels in the period ahead, helping to build confidence that the weakness seen in the September quarter last year may have reversed in recent months.
We’ll get further clarification on that front later this week when the Australian Bureau of Statistics (ABS) releases Australia’s November retail sales report.
If the strength in consumer confidence is replicated in official spending measures, that will eliminate what many deem to be the last major area of concern for the Australian economy, and could potentially see the Reserve Bank of Australia lift interest rates sooner than many expect.
It’s still far too early to tell whether spending has rebounded, but today’s report is undoubtedly a positive outcome.