Australian consumer confidence surged last week, buoyed by a string of strong economic data releases and brushing aside political uncertainty in Canberra.
The latest ANZ-Roy Morgan consumer confidence index rose by 3.4%, recovering most of the losses of the prior four weeks. At 115.8, the index is also back above its long-run average of 112.7.
According to ANZ, the strength in the survey was concentrated in sentiment towards the domestic economy.
“The increase in confidence was largely driven by a bounce in consumers views towards the economic outlook,” said the bank. “Views towards the economy in the next 12 months bounced by a sharp 7.5%, and views towards the economy in the next 5 years also rose strongly, up 5.2%.”
The bounce in economic sentiment coincided with the release of a strong NAB Australian business survey along with a report from the ABS which revealed Australian unemployment tumbled to 5.7% in March, the lowest level seen since September 2013.
Australian stocks also enjoyed a strong week, rallying 4.5%.
There have been mixed signals on the Australian consumer outlook this week. Yesterday, Qantas announced it was reducing capacity on domestic flights after detecting a slowdown in bookings during March. The
The survey’s gauges on personal finances also came in mixed.
Respondents views towards their current financial situation bounced 3.9% having fallen 5.5% previously, offsetting a deterioration in sentiment towards future finances which fell 1.9%.
The final survey subindex — whether now is a good time to buy a major household item — jumped by 3.7%, a good sign for a potential increase in household spending after several months of underwhelming retail sales.
To Felicity Emmett, ANZ head of Australian economics, the question now is whether renewed confidence in the economy will translate to a lift in household consumption.
“Consumer confidence bounced last week after declining four weeks in a row, with this turnaround taking sentiment back above its long run average,” says Emmett.
“Last week’s strong labour market report showing a fall in the unemployment rate to 5.7% is likely to have been a key factor in the rebound. The jobless rate is now at the lowest level in over two years, and we anticipate conditions will remain solid in the near term.
“The strength in business conditions, which are now back at their highest levels since the GFC, point to a solid labour market in the near term.
“While good news on the labour market and business conditions appear to have boosted confidence recently, the key is how confidences translates into spending. Household spending remains a key risk to the outlook, and as such confidence will be key to watch in the lead up to the Commonwealth Budget and what looks likely to be a July 2 double dissolution election.”