Australian consumer confidence turned around for the better last week, with the ANZ-Roy Morgan survey posting a 4.6% bounce.
The result more than offset last week’s 3.8% fall, and sent the index to an eight-week high.
Here’s the chart:
Data for the survey is collected on the weekend, and based on around 1,000 face-to–face interviews.
According to ANZ’s head of Australian economics David Plank, last week’s bumper jobs report was the key driver.
Not only did the economy add more jobs for the 11th straight month, the 54,200 jobs added in August easily beat expectations for a 15,000-20,000 rise.
“The surge in confidence last week is quite encouraging, with confidence likely buoyed by the monster jobs report out last week, which included strong job gains and a drop in the underemployment rate,” Plank said.
Underemployment measures those who are employed but would like to work more hours.
It dipped by 0.2% to 8.6% — still elevated, but if it continues to fall it may be a sign that months of strong employment growth is finally translating to higher wage growth.
“The large increases in full-time employment and the ongoing reduction in spare capacity have implications for wage growth and consequently for household confidence.”
The gains in the index this week were driven by improving sentiment towards the broader economy. Views towards current and future economic conditions both surged — by 5.8% and 12.9% respectively.
However, when adjusted for weekly volatility the current levels for both sub-indexes remain below their long-term average.
Households have an increasingly positive view towards their current finances, which is promising for the consumption outlook, a critical component of economic growth.
Despite low wage growth and high household debt, views towards current financial conditions rose by 2.6% last week which took the sub-index to a 15-week high.
Looking ahead, sentiment towards household finances wasn’t as rosy. The future financial conditions index recording a 0.3% fall although it remains above its long-term average.
“The four-week moving average aggregate financial conditions’ index has edged above its long term average (115.4 vs 112.8) and seems to be showing some momentum,” Plank said.
While the ANZ-Roy Morgan report tends to be subject to weekly volatility, a consistent run of positive readings would be a welcome turn-around.
The index has been trending lower in recent months with a clear gap opening up between consumer confidence and business conditions. In view of that, a pickup in consumer sentiment would brighten the outlook for the domestic consumption component of GDP.
Despite the positive flow-on effects from another impressive jobs reading, Plank concluded with a note of caution.
“Sentiment towards personal finances is unlikely to recover to the levels seen in the second half of 2016 any time soon, as household balance sheets continue to be somewhat stressed because of high levels of debt and low wage growth,” Plank said.