The ANZ-Roy Morgan consumer confidence index jumped 3.6% to 121.8, leaving it sitting at the highest level seen since November 2013.
It is now well above its long-run average of 112.8.
The chart below from ANZ tells the story. Boing!
According to ANZ, the strength was broad based with every subindex in the survey posting a strong increase of the week.
“Households’ views of the 12 month economic outlook rose a strong 5.4%, while households’ views of the five year economic outlook improved by 4.8%,” said ANZ, noting that “both indices are now above their long-run averages for the first time since early 2013”.
Measures on personal finances also improved, albeit by a lesser margin, with the gauge on current finances rising 1.3%, marginally overshadowed by a 1.4% lift in views towards finances in the year ahead.
The final component of the survey — whether now was a good time to buy a major household item — surged by 5.1%, leaving it at the highest level seen in over a year. ANZ notes that a strong lift in auction clearance rates recently may have been responsible for the enormous jump in the subindex.
Jo Masters, senior economist at ANZ, suggests the improvement in confidence levels reflects more upbeat views of consumers’ personal financial situations as well as improving confidence about the economic outlook.
“Last week’s labour market report, which showed a jump in employment and saw the unemployment rate tick down to 5.7%, was likely one of the factors behind the lift in confidence,” said Masters following the release of the report.
“Higher levels of confidence are also consistent with another week of solid auction clearance rates – particularly in Sydney and Melbourne.
“Adding to the positive mix, equity markets remain buoyant and volatility in financial markets is low,” she added.
Though a promising sign for household spending levels in the period ahead, Masters’ cautions that a spike in confidence does not automatically imply that consumption levels will follow suit.
“While good news on the labour and housing markets appear to have boosted confidence recently, the key for the broader economic outlook is whether higher confidence can translate into spending, particularly given high household debt,” she said.
Retail sales — making up around 30% of total household consumption — have been underwhelming in 2016 despite confidence levels holding above their long-run average for the vast majority of the year.
Australians are clearly feeling confident but that’s not been enough to spur on spending as yet.