Australian consumer confidence, predictably given easing concerns surrounding the Greek and Chinese economies, continued to push higher last week.
The ANZ-Roy Morgan consumer confidence index rose by 0.6%, following a 4.5% bounce previously, taking the index back to 112.5. While only fractionally below the series long-run average of 112.7, the index remains some 3.2% lower than levels of a year ago.
Over the week improved perceptions towards personal finances managed to offset a deterioration in the outlook for the economy. The full breakdown of the survey’s subindices can be found below.
- Financial situation compared to a year ago 108.1 (+2.0%)
- Financial situation next year 124.1 (+1.1%)
- Economic conditions next year 91.2 (+1.4%)
- Economic conditions next five years 104.1 (-0.5%)
- Time to buy a major household item 135.0 (+1.2%)
ANZ chief economist Warren Hogan believes the improvement in confidence is a positive sign, particularly towards personal finances.
“The fact that confidence has held the previous week’s bounce is a positive sign that confidence could continue to recover in coming weeks in the absence of further market volatility. More broadly, consumers continue to hold a more positive view towards their financial situation, relative to economic conditions. The minutes from the July RBA meeting pointed out that more positive views on personal finances likely reflect low interest rates and high household wealth. However, households’ confidence in their finances is not translating into the same strength in consumer spending as seen in previous cycles (Figure 3). This is likely to be driven by weak wages growth and consumers continuing to pay down debt. As such, consumer spending is likely to remain below trend and a key impediment to a lift in economic growth.”
While the recent bounce in confidence should be seen as a positive for potential consumption moving forward, it’s worth noting the survey tends to bounce around based on the prevailing headlines that dominate during the survey period. Earlier this month sentiment was crushed on the back of heightened concerns surrounding the Greek and Chinese economies. Now, in the back-end of the month, sentiment has rapidly improved as the headlines towards those nation’s improved.
As Hogan points out, though, the improvement in confidence could continue “in the absence of further market volatility”. Given Chinese stocks suffered the largest percentage decline in eight years yesterday, coupled with the relationship the survey has had to movements in Chinese stocks in recent weeks, any further falls in Shanghai may weigh on the sentiment when the survey is next released this time next week.