Australians are suddenly concerned about their finances

Photo by Tim Graham/Getty Images

Australian consumer confidence continued to slide last week, falling to the lowest level since December last year.

And Australia’s January jobs report — something that revealed a big drop in full-time employment — may have been responsible, leading to a sharp drop in sentiment on family finances.

The weekly ANZ-Roy Morgan consumer confidence index fell 2.3% to 113.7, extending its decline from early January to over 5%.

However, it still sits above its long-run average of 112.8, so Australians, collectively, are still more confident than usual right now.

So it’s not all bad news.

David Plank, head of Australian economics at ANZ, called the result “somewhat surprising” given recent economic data has been “broadly positive”.

“Signs of renewed weakness in full-time employment may have weighed on consumers views’ of their personal finances even as the headline unemployment rate ticked down,” he said following the release of today’s report.

That may explain the enormous plunge in sentiment towards current finances which tumbled 7.5% to 101.6, leaving it at lows not seen since August 2014.

That’s an outcome that does not bode well for household spending, says Plank.

“Views on financial conditions have been trending down since the start of 2017 and have now dropped to around the long-run average,” he says. “This warrants some concern as the sub-index is closely correlated with consumer spending.”

The downbeat view on current finances was mirrored by views on the outlook for the economy, with sentiment souring looking both one and five years ahead.

“Households’ views of economic conditions over the next 12 months declined by 1.6%, following a 3.8% decrease the previous week,” aaid Plank.

“Sentiment regarding economic conditions over the next five years dropped 4.9% this week, reversing recent gains, and bringing the index to its lowest level in 12 weeks.”

Those slightly worrying outcomes were partially offset by view on the outlook for finances in the year ahead which edged higher by 0.3%. View on whether now was a good time to buy a major household item also improved, rising by a larger 1.3%.

Outside of international factors, sentiment is likely to be influenced by a raft of Australian economic data released in the days ahead that will provide a reasonable guide as to how Australian GDP will print when the Q4 report is released on Wednesday next week.

After Australia’s Q3 GDP report last December revealed a surprise contraction of 0.5%, sentiment levels subsequently plunged to a seven-month low.

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