After some wild headline-driven swings over the past month, Australian consumer confidence stabilised last week with the ANZ-Roy Morgan index rising 0.4% to 112.9.
The index, up 5.5% from its recent low, is now back above its long-run average of 112.7.
During the week three of the survey’s five components improved with family finances up 3.61% to 112.0 compared to a year earlier, the highest level on record. Elsewhere, views on the economic outlook — both in the year ahead and out five years — improved modestly, while perceptions on family finances in the year ahead and whether now was a good time to buy a major household item deteriorated.
The full breakdown of the survey’s components can be found below.
- Financial situation compared to a year ago 112.0 (+3.61%)
- Financial situation next year 122.1 (-1.61%)
- Economic conditions next year 96.4 (+5.70%)
- Economic conditions next five years 106.0 (+1.83%)
- Time to buy a major household item 128.2 (-5.04%)
Commenting on the report, ANZ chief economist Warren Hogan believes the recent volatility in the survey shows how vulnerable Australian consumers are to bad economic news.
“Consumer confidence is stable this week but still below the levels seen in early July just prior to the problems in Greece and China’s stock market rout. The recent bounce suggests the loss of confidence in July was attributable to these offshore events, but the fact that it remains below the levels seen for much of the May-June period highlights how vulnerable the Australian consumer is to bad economic news. At this level, consumer confidence is right on the long-term average.
The underlying drivers of confidence reflect the complexity of forces affecting the Australian economy at present. Three weeks ago consumers’ views on the long-term economic outlook sank to the lowest level since the weekly survey began in 2008, but have recovered somewhat since. This week consumers’ views on their own finances right now have hit a new high point. In essence, Australian consumers are happy with their financial position but are very worried about the outlook. High debt levels across the household sector, the weakest income growth since the 1960s, a flat labour market, and concerns over retirement incomes are all apparently at work here.”
Based on concerns over their consumer’s future financial position, Hogan notes that “in this environment we expect consumer demand to remain on an even footing but will not grow strongly”.
That’s not overly encouraging news, particularly given the need for households to boost spending in the period ahead to help offset the effects of the dwindling mining investment boom.
Whether that eventuates is still debatable. In the meantime markets will get an opportunity to see how spending fared in June when the ABS releases its monthly and quarterly retail sales report at 11.30am. A gain of 0.4%, both for the month and the June quarter, is expected.