Confidence among Australian consumers soared last week, mirroring the recovery in Australian stocks and the Australian dollar, with the ANZ-Roy Morgan consumer confidence index jumping 5.1% to 115.6. The reading, above the long-run series average of 112.7, left confidence at the highest level in 15 weeks.
According to ANZ, the rise in confidence was broad-based with the survey’s subindices on economic conditions in the next five years and personal finances in the next 12 months posting gains of 10% and 6.6% respectively, rising to the highs not seen since early 2014.
The full breakdown of the survey’s various subindices can be found below.
- Financial situation compared to a year ago 108.8 (+2.4%)
- Financial situation next year 130.0 (+4.8%)
- Economic conditions next year 99.6 (+4.1%)
- Economic conditions next five years 112.5 (+10%)
- Time to buy a major household item 127.2 (+0.6%)
As hinted at earlier, ANZ chief economist Warren Hogan suggests the recovery in Australian stocks and the dollar may have been behind the sharp uplift in confidence. Over last week the ASX 200 index jumped by 4.5%, while the Australian dollar rallied 4%.
“Consumer confidence climbed to a 15 week high last week, confirming an uplift in momentum since the appointment of Prime Minister Malcolm Turnbull. The lift in confidence has coincided with a rise in equity markets and a stronger Australian dollar, suggesting confidence is in some part tied to financial market sentiment.
The strong rise in views towards the economic outlook likely reflects faith in the Turnbull government. To sustain confidence at this level, however, the government needs to present a clear economic story to the country. This is necessary in the current economic environment, where there are numerous headwinds to sentiment and economic activity including soft wages growth, weak investment and an easing outlook for the housing sector.”
Although an impressive weekly bounce, one has to ask — can the gains can be sustained should risk assets yet again begin to falter? It is a widely accepted view that the sharp rally, in both the ASX 200 and Australian dollar last week, was partially due to short term factors such as market positioning. There are plenty out there who remain skeptical about the potential for the rally to continue.
Given the week-to-week volatility in the survey, perhaps it is best to focus on the four-week survey average to gauge the overall trend in confidence. It currently sits at 112.7, smack in line with the survey’s long-run average. All things considered, that sounds about right at present.