Australian consumers remain upbeat, but that may not last

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Perhaps as a consequence of the survey period not capturing the worst of the implosion in China’s stock market, Australian consumer confidence fell just fractionally last week with the ANZ-Roy Morgan survey dipping 0.2% to 113.0.

The decline, following a 0.62% bounce recorded previously, left confidence levels marginally above the survey’s long-run average of 112.7.

Concerns surrounding the long-term economic outlook continued to deteriorate with views on conditions over the next five years falling a further 1.2%. Perhaps reflective of that view, sentiment towards family finances in the year ahead also slipped 1.0%. Offsetting those concerns, sentiment toward economic conditions in the year ahead and whether now was a good time to buy a major household item both improved.

Here’s the breakdown of the survey’s components.

  • Financial situation compared to a year ago 110.3 (-0.45%)
  • Financial situation next year 122.6 (-1.04%)
  • Economic conditions next year 93.7 (+1.1%)
  • Economic conditions next five years 107.1 (-1.2%)
  • Time to buy a major household item 131.1 (+0.92%)

Reflective of the broader trend within the survey, sentiment towards the economy – both near and long-term – is down 5.4% and 2.6% on the levels of a year ago, something the ANZ suggests “is consistent with the equity market, which is down over 7% from a year ago”.

Speaking on the survey’s findings, ANZ chief economist Warren Hogan – like us here at Business Insider – is cautious on the result given it failed to capture the extreme levels of financial market volatility seen in recent days.

Here’s Hogan.

“Consumer confidence appears to be consolidating around its long run average, however the latest reading was taken last weekend, before the most recent bout of market volatility. We will be watching consumer confidence closely to gauge the impact of global financial problems and the related equity market weakness on Australian consumers. Australia‚Äôs equity markets have fallen by more than 15% since the peak recorded in March, with more than half that decline happening in August.

Consumer confidence readings around the long-run average level mask divergent trends in the underlying subcomponents. This reflects the fact that consumers are facing mixed signals. On the one hand, the property market remains buoyant and employment has been stronger than expected. On the other hand, the recent fall in equity markets and emerging concerns about growth in China and its impact on Australia are weighing on sentiment.

With global equity markets still under pressure this week, and patchy growth in Australia, confidence and consumer spending appear to be vulnerable to further bad news.”

Indeed, given Australian consumer confidence has swung wildly in recent months on the back of offshore economic concerns – particularly towards China – it will be interesting to see whether confidence can remain firm should extreme financial market volatility continue in the days ahead.

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