Australian consumer confidence weakened last week, driven by renewed near-term concerns about the outlook for the economy and finances.
The ANZ-Roy Morgan consumer confidence index fell 0.9% to 116.4, continuing to trend lower from the peak seen at the beginning of the year.
Despite the recent moderation, seen in the chart below from ANZ, the index still remains above its long-run average of 112.8.
Put another way, while confidence is ebbing, it’s falling from elevated levels. The key takeaway is that collectively, Australians are more confident than usual right now.
David Plank, ANZ’s head of Australian economics, said the deterioration in near-term sentiment towards the economy and finances may reflect renewed concern over global political instability and downward revisions from the RBA towards the outlook for Australian economic growth.
“The deterioration in the financial and economic outlooks over the next 12 months may reflect the current global policy uncertainty as well as downward revisions to growth in last week’s Statement on Monetary Policy,” he said.
During the week, the surveys measure on economic conditions in the year ahead slipped 5.7%, partially unwinding some of the gains seen in the previous two weeks.
Perceptions towards finances in the year ahead also dipped, falling 1.8%.
Along with a 1% decline in views towards economic conditions looking five years ahead, it was more than enough to offset a 1% increase in views on current finances and a flat reading on whether now was a good time to buy a major household item.
However, he said the underlying trends provide reason for optimism.
“Confidence remains above trend and is likely to remain elevated in the longer term in our view, supported by solid economic fundamentals and accommodative monetary conditions,” Plank said. “Importantly, confidence in current finances appears to have stabilised.”
The latter is a positive outcome given it has a reasonable relationship with household spending, the largest component within the Australian economy.
Looking ahead, Plank says this week’s Australian jobs report for January — released on Thursday — has the potential to impact confidence in the near term.
“We expect a solid rise in employment given the strength in business conditions and leading employment indicators,” he says.