Australian consumer confidence continues to weaken, dropping to an 11-month low last week.
And it was entirely driven by increased pessimism towards the Australian economic outlook.
The weekly ANZ consumer confidence index, produced in conjunction with Roy Morgan Research, fell by a further 1% to 112.0, leaving it at the lowest level seen since April 2016.
Not only that, for the first time in over a year, confidence levels are now below their historic average.
David Plank, head of Australian economics at ANZ, suggested that it was last Thursday’s disappointing Australian jobs report for February — revealing a decline in employment, spike in unemployment and the equal-highest level of underemployment on record — that was largely responsible for the continued deterioration in sentiment.
“In our view, concerns about labour market conditions have likely weighed on confidence over the past few weeks,” said Plank following the release of today’s report.
“Continued soft wages growth is likely a factor and last week’s reported rise in the unemployment rate for February may have weakened confidence, not least by further dampening income expectations.”
Plank suggests that low wage growth remains a key downside risk to both the inflation and spending outlook this year.
Interestingly, ANZ said that it was a sharp deterioration in sentiment towards the economic outlook, rather than views on household finances, that drove the index lower last week.
Views towards the 12-month economic outlook fell by a further 3.3%, following an even larger 5.2% slump in the previous week, while those looking five years ahead tumbled by 3.5%.
The 12-month outlook was the weakest reading since early December when the ABS reported that the Australian economy contracted at the sharpest pace since the GFC in the September quarter last year.
At 103.3, the subindex tracking the five-year outlook also sits at lows not seen since February 2016.
Clearly, Australians are downbeat on where the economy is heading right now.
However, despite those views, it wasn’t enough to impact sentiment on current and future finances. The subindex tracking finances compared to a year ago ticked up by 1% while those looking a year ahead were basically unchanged.
Crucially for the outlook for consumer spending, particularly the measure on current finances given its relationship to household consumption expenditure which is the largest component within Australian GDP, both finance measures remain above their long-run averages.
The weakness in the ANZ-Roy Morgan report mirrored that of the separate Westpac-MI consumer sentiment survey for March, released last week.
According to that report, confidence levels remain subdued with pessimists continuing to outnumber optimists, continuing the pattern seen over the past four months.