The ANZ-Roy Morgan weekly consumer confidence index showed a turnaround in sentiment last week, climbing by 0.8% to 113.3.
That largely offset last week’s decline and nudged the index just above its four-week moving average of 113.2.
On the longer-term trend, the index has struggled to gain momentum since a sharp fall in the wake of May’s federal budget:
Data for the survey is collected on the weekend, and based on around 1,000 face-to–face interviews.
Last week’s increase was driven by a strong turnaround in consumers’ views towards the broader economy.
Views toward current economic conditions rose by 4.3% to their highest level since July, and views toward economic conditions over the next five years rose by 3.5%.
According to ANZ’s head of Australian economics David Plank, that rise was most likely due to another strong employment report as Australia’s labour market continues to impress.
It follows a similar result last month in the wake of a bumper jobs report for August, which drove a 4.6% increase in the consumer confidence index the following week.
Jobs data last week showed that the economy beat expectations, adding 19,800 jobs for the month of September in seasonally-adjusted terms — the 12th straight month of growth.
“Continued improvement in the labour market and an eventual acceleration in wage growth is likely the key to a clear uptrend in consumer confidence,” Plank said.
“The ongoing reduction in spare capacity in the labour market offers the prospect of higher wages in time, adding to the upward impetus provided by the Q3 lift in the minimum wage.”
However, while views toward the economy improved, last week’s data showed that cost of living pressures are still weighing on Aussie consumers.
Views towards current household finances fell for the second straight week, and are now back around their long-term average. Sentiment towards financial conditions over the next five years also fell, dipping by 0.9%.
In view of that, strong jobs reports are unlikely to be enough to drive consumer confidence materially higher — that won’t happen until there’s a pick-up in wage growth.
“We think that there has been a little bit of overshoot in the official employment figures recently, so there may be a risk of some weaker employment numbers for a month or two that could stall any uptrend in confidence,” Plank added.
“We think, however, that any such weakness will prove to be temporary.”