Australian consumer confidence is surging heading into Christmas

Photo: Paul Kane/Getty.

Australian consumer confidence surged last week, a pleasing outcome for policymakers and retailers heading into the busy Christmas trading period.

The ANZ-Roy Morgan consumer confidence index jumped by 2.8% to 118.6, the highest level in 10 weeks.

It also sits well above the series long-run average of 112.8, so confidence levels are well above historic norms.

“Australian households remain optimistic about their finances and more confident about the economy, especially in the near term,’ said Felicity Emmett, head of Australian economics at ANZ.

In particular, she notes that views on current finances are particularly upbeat, noting that “this indicator tends to correlate well with consumer spending, suggesting that the outlook for consumer spending remains positive despite the recent lull.”

This chart from ANZ shows the relationship between sentiment towards current household finances and household consumption growth, the largest component within the Australian economy.

Over the week, the biggest improvement came from sentiment towards finances in the year ahead, which jumped by 4.4%.

Elsewhere, views on current finances edged up by 0.2% while those towards the economy looking one and five years ahead bounced by 2.9% and 2.2% respectively.

Adding to optimism over the outlook for household consumption, the final measure of the index — whether now was a good time to buy a major household item — rose by 4%, reversing declines seen in the previous three weeks.

A solid result in anyone’s language, and one that Emmett says is “encouraging” for the outlook for consumer spending.

“It suggests that the apparent loss of momentum in the economy in Q3 is likely to be temporary, with last week’s retail sales data suggesting that growth in household spending accelerated into Q4,” she says.

Australian Q3 GDP — released on Wednesday — is expected to reveal that real GDP growth slowed sharply in last quarter. Some are even forecasting that a negative growth quarter may arrive.

While Emmett suggests that any weakness in the GDP report may prove temporary, she believes that the report, along with today’s RBA monetary policy statement, “will likely shape the news flow in the coming days and have the potential to influence consumers’ confidence over the coming week”.

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