Australian consumer confidence has risen for the first time this year

Photo: Mike Hewitt/Getty Images

For the first time this year Australian consumer confidence has increased.

The latest ANZ-Roy Morgan consumer confidence index rose by 0.2% last week, snapping a run of four consecutive declines.

Despite the small uptick in confidence the index, at 111.4, remains below its long run average of 112.7.

According to ANZ, the improvement was driven by a lift in perceptions towards current consumer finances along with a surge in whether now was a good time to buy a major household item.

The indices “financial situation compared to a year ago” measure increased by 0.9% while the gauge on whether now was a good time to buy a major household item bounced 2.8% having hit a multi-month low previously.

Largely offsetting those improvements, measures on finances in the year ahead, along with perceptions for the economy looking one and five years ahead, slid by 1.3%, 1.7% and 0.5% respectively.

With confidence already below average, Felicity Emmett, ANZ’s co-head of Australian economics, contemplates whether household consumption – a crucial cog in Australia’s economic transition – will be able to accelerate further in the year ahead.

Consumer confidence was broadly unchanged last week after four straight weeks of declines. International events have clearly played a part in the weakness in consumer confidence over recent weeks. As a small, open economy, Australia remains vulnerable to the fortunes of the global economy. The domestic economy, however, is currently not in bad shape, with the unemployment rate improving significantly over recent months. A solid rise of 1% in the ANZ measure of job ads in January suggests the near-term employment outlook remains positive, which should play some part in supporting consumer confidence.

The question will be whether this translates to stronger spending. This is what the RBA is banking on – a return to above trend consumer spending. Last week’s December retail numbers were disappointing and suggest that household consumption growth remains moderate at best. Further improvements in the labour market and confidence are likely to be required to drive a stronger recovery in consumer spending.

That’s largely unchanged from message seen in recent months, with further improvement in labour market conditions largely required to help offset an expected slowdown in house price growth.

Should that area falter at a time when business investment is declining and residential construction slowing, it will increase pressure on both the RBA and government to deliver further stimulus to buttress the household sector.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.