Headline consumer confidence declined last week, as a number of factors weigh on sentiment accordingly to the weekly ANZ/Roy Morgan Consumer Confidence Index, despite strong employment numbers from the ABS.
The index showed household expectations for growth next year declined by 1.9%, partly reversing the previous week’s gain and bringing the index back to its long run average:
ANZ senior economist Felicity Emmett said that geo-political concerns and continued focus on housing affordability weighed on sentiment last week.
Emmett cited the effect of geo-political risk on the Australian share market. She said the impact of those risks was weighing on share prices, which in turn fed through to Aussie household’s concerns about the economic outlook.
In addition, “the RBA’s focus and the associated media spotlight on the exuberance in house prices in Sydney and Melbourne as well as high levels of household debt is possibly feeding into concerns about the outlook,” she said.
“For some time, we have worried that households could decide to rein in consumption growth in response to the combination of low wage growth and rising household debt. The recent decline in confidence and the weakness in retail sales suggest this may be occurring.”
Household’s expectations for economic conditions over the next five years dropped by 4.1%, hitting its lowest level since September 2015:
Among the five sub-indices that make up the headline figure, only one reported a rise – household’s views about their future finances rose by 2.7%. However, household’s view of their current financial situation fell by 0.7%.
“In our view, a reassertion of the downward trend in the unemployment rate along with some improvement in wage growth will likely be required to materially lift consumer confidence,” Emmett said.