Another strong jobs report was the catalyst for a sharp rise in Australian consumer sentiment last week.
The weekly ANZ-Roy Morgan consumer confidence index bounced by 2.3%, following a 0.4% fall in the week prior.
Last week’s reading of 115.1 was above the long-term average of 112.9, with sentiment towards both current household finances and the broader economy improving:
“Consumers appear to have taken heart from the ongoing improvement in labour market conditions, in particular the large increases in full-time employment and hours worked,” said ANZ chief economist David Plank.
Household views towards their current finances rose by 1.8%, off-setting the previous week’s fall. Views towards future financial conditions fell by 1.1%, but both indexes remain above their long-term averages.
The largest jump in sentiment was seen in Australian consumers’ views towards the broader economy. Views towards current economic conditions jumped by 7.9% last week, taking the index to a 5-month high.
The sharp rise reverses a 6.5% fall two weeks ago ahead of the most recent jobs report, after which David Scutt highlighted the growing disconnect in sentiment between Australian businesses and consumers.
Views towards future economic conditions rose by 2.7%, which more than off-set the previous week’s 1.6% fall however the future economic conditions sub-index remains below its long-term average.
The ‘time to buy a household item’ index rose by 1.8% and remains comfortably above its long-term average, while inflation expectations remained unchanged at 4.3%.
Plank said that the continued run of low inflation is likely to place a cap on wage growth, and pointed to key events later in the week which could impact consumer confidence.
“We expect labour market conditions to continue improving, although at a slower pace, now that the period of catch up between official and survey based measures is largely complete,” Plank said.
“We will be closely watching Governor Lowe’s speech and the CPI release out later this week for further insight into the RBA’s assessment of the labour market and the course for monetary policy.”