Australian consumer confidence fell fractionally last week.
The ANZ-Roy Morgan consumer confidence index slipped 0.4% to to 114.0, leaving the gauge fractionally above its long-run average. While the weekly figure fell slightly, the four-week survey average, — a better indication of the overall trend — rose to 113.5, the highest level since November last year.
According to ANZ, the weekly decline was driven by lower expectations for the economy, both in the year ahead and out five years, while sentiment towards family finances over the next 12 months also fell. This was partially offset by improved readings for perceptions of current finances, compared to a year ago, along with whether now was a good time to buy a major household item.
Commenting on the report findings, ANZ chief economist Warren Hogan believes the recent improvement in confidence needs to be sustained for a period of time in order to encourage greater levels of household spending.
“Consumer expectations of the outlook remain subdued. We expect this is due at least in part to concerns about future income and employment growth. This uncertainty may be feeding into more cautious consumer behaviour which is evident in ongoing high rates of mortgage repayments. Reduced willingness to increase debt is likely to be reducing the efficacy of monetary policy and contributing to softer consumption growth. As such, a sustained lift in expectations is crucial to building consumer confidence, which will encourage an improvement in spending.”
The chart below shows how household spending has responded to recent rate cuts from the RBA. Compared to previous rate-cutting cycles the lift in household spending has been subdued to date.
While the internal components are often volatile week-to-week there are some positive signs beginning to emerge. The subindex on whether now is a good time to buy a major household item is clearly trending higher, and suggests consumers may be about to increase their spending levels. Consumer attitudes towards the outlook for the economy and their own personal finances remains skittish. Should domestic labour market indicators continue to improve in the months ahead, as has been the case recently, this is unlikely to remain the case.
Here’s the full breakdown of the survey’s weekly subindices.
- Financial situation compared to a year ago (+5.25%)
- Financial situation next year 123.7 (-1.12%)
- Economic conditions next year 93.3 (-4.3%)
- Economic conditions next five years 104.4 (-4.22%)
- Time to buy a major household item 140.1 (+1.45%)