Australian consumer confidence has fallen below its long-run average.
According to the latest ANZ-Roy Morgan consumer confidence index, confidence slid by 0.9% to 112.2 last week, taking the index below its historic average of 112.7 for the first time in four months.
Confidence has now fallen over the past three weeks, leaving the index down 3.6% so far in 2016.
Three of the surveys five subindices deteriorated during the week with the steepest decline registered for whether now was a good time to buy a major household item. Sentiment towards household finances compared to a year ago, along with perceptions towards the economy in the year ahead, also deteriorated.
Perceptions towards family finances in the year ahead and economic conditions looking five years ahead improved modestly.
The full breakdown of the surveys internal movements can be found below.
- Financial situation compared to a year ago 108.6 (-1.9%)
- Financial situation next year 130.5 (+2.3%)
- Economic conditions next year 88.7 (-2.7%)
- Economic conditions next five years 105.1 (+0.5%)
- Time to buy a major household item 127.9 (-3.0%)
Despite the continued slide in confidence, ANZ chief economist Warren Hogan notes that gauges on personal finances both remain above their long-run trend, suggesting that consumer spending is likely to remain firm in the first half of 2015.
Consumer confidence has fallen for the third consecutive week and is now below its run average. Recent weakness looks to have broken the uptrend in confidence that has been in place since September. Australian’s perceptions of the economic environment continue to be highly sensitive to bad news on the global economy and markets. In particular, views towards the short-term economic outlook have been in a downward trend since early December and the recent financial volatility has only made matters worse. Consumers’ views towards the economic outlook are clearly weighing on confidence right now.
Consumers’ views towards their current personal finances, a measure most correlated with household spending, remains elevated. This most likely reflects strong domestic economic fundamentals including low inflation and interest rates, falling petrol prices and rising employment. This suggests to us that consumer spending should remain firm in early 2016 despite the weakness in overall consumer sentiment. Our concern is that as the year progresses, other parts of the economy, including the housing sector and business investment, will be a headwind to economic growth, and may also be a headwind to confidence on the economic outlook.
While the near-term outlook for household spending appears strong, it will need to remain that way beyond the first half of 2016 to ensure Australia’s economic transition continues to gain momentum in the years ahead.
As ANZ note, lower house price growth, along with a continued decline in business investment, will likely act as a headwind to economic growth in period ahead, suggesting that robust labour market conditions will need to prevail to ensure household consumption continues to accelerate.