After hitting a three-month high at the start of 2017, Australian consumer confidence slipped fractionally last week, according to the latest ANZ-Roy Morgan consumer confidence survey released on Tuesday.
The index fell 0.7% to 119.3, partially retracing the enormous 5.9% surge seen at the start of the year.
Despite the weekly slip, the index remains comfortably above its long-run average of 112.8, meaning households are currently more confident than usual based off responses that date all the way back to 1990.
Jo Masters, senior economist at ANZ, said that weaker sentiment towards finances drove the weekly decline, overriding another bounce in perceptions towards the economic outlook.
“Households’ views towards their finances compared to a year ago fell 4.8%, more than reversing the gain over the previous week,” said Masters. “Meanwhile, after a sharp bounce the previous week, households’ views towards their future finances edged just 0.7% lower.”
While both subindices weakened last week, ANZ notes that they remain well above the survey’s long-run average.
Elsewhere, and helping to minimise the decline in the headline index, perceptions towards the economy, and whether now was a good time to buy a major household item, both improved.
“Households’ views of economic conditions over the next 12 months were flat, while views of the economic outlook in the next five years rose 0.6%,” says Masters.
“Views on whether now is a good time to buy a household item posted another solid gain, rising by 1.1% last week.”
The latter now sits at a five-month high, helped by ongoing strength in east coast housing markets.
As this chart from ANZ reveals, while still below its long-run average, perceptions towards the outlook for the Australian economy are now starting to improve.
Perhaps adding to the case for the RBA to leave rates unchanged in the months ahead, ANZ said that consumer inflation expectations — something the RBA is watching closely given the implications for consumption and wage increases — continued to edge higher last week, thanks predominately to a recent spike in petrol prices.
The survey’s four-week moving average of the expected rate of inflation in the year ahead rose to 4.3%, a notable increase from the 4% level of mid-December.
“It’s interesting to see the pickup in inflation expectations, although this most likely reflects the recent acceleration in petrol prices rather than broad-based inflationary pressures,” said Masters.
While she says at current levels “confidence looks quite robust and continues to suggest a positive outlook for spending”, Masters suggests that this week’s Australian jobs report for December — released on Thursday — will likely prove influential on confidence levels in the week ahead.
“The labour force report has the potential to impact consumer confidence this week,” she says. “We are expecting decent job growth in December, but confidence remains vulnerable to a weaker than expected report.”