Australian consumer confidence fell heavily last week, recording its first decline since mid-April in the process.
The ANZ-Roy Morgan consumer confidence index skidded 2.2% to 113.2, unwinding part of the 3.6% gain achieved in the prior five weeks.
Confidence levels now sit marginally above the series’ long-run average of 112.8, something that is formulated on data going back to 1990.
The chart below, supplied by ANZ, shows recent movements in the confidence index, comparing the level to the series’ long-run average.
According to ANZ, perceptions towards the economic outlook soured during the week, something of an anomaly given a reasonable unemployment report for April released just before the survey was conducted.
The subindex measuring economic conditions in the next 12 months tumbled 6.6%, amplifying the decline in expectations looking five years ahead which slid by a smaller 2.4%.
Elsewhere, readings on consumer finances came in mixed, with a 4.7% decline in expectations for the year ahead partially offset by a 0.7% improvement in views towards current finances.
Perhaps news that the ASX 200 hit a fresh nine-month high contributed to the strength in the latter.
The final component of the survey — whether now was a good time to buy a major household item — rose by 1.9% to 136.5, leaving it at the highest level seen since January 10 this year.
This is a promising sign for current household spending levels after a lacklustre few months, and fits with recent strength in auction clearance rates, according to the ANZ.
Despite the mixed nature of the report — aside from the ugly headline drop — Jo Masters, senior economist at the ANZ, called the result “disappointing”, suggesting that the decline may be a sign that households are becoming increasingly nervous before the federal election.
“It is disappointing to see confidence retrace much of the gains of the last four weeks,” said Masters.
“Looking at the detail, consumers appear to be increasingly nervous about the outlook for the economy and their finances in 12 months. It’s not clear what has driven this, given recent positive performances in both property and equity markets
“It is, however, possible that the election campaign is starting to weigh on confidence.”
While that will be a constant feature of the survey over the next five weeks, Masters suggests that a raft of domestic economic data, none less than GDP that will be released on Wednesday, will be influential on sentiment levels over the near-term.
“There is plenty of economic data this week to provide consumers with a stocktake of how the economy has performed recently,” says Masters.
“While consumer spending and the housing sector are likely to have contributed to economic growth, business investment remains weak and will continue to be a drag on activity.
“Tomorrow’s GDP report will likely shape news flow in the coming days and has the potential to influence consumers’ confidence.”
According to a survey conducted by Bloomberg, the median economist forecast is looking for quarterly growth of 0.6%, something that will see the year-on-year rate slow to 2.7% from 3.0%.