Australian consumer confidence rebounded strongly last week, helped in part by the robust Q2 GDP report released on Wednesday.
Given all the headlines about Australia going 25 years without experiencing a technical recession, it would have been unnerving if confidence levels didn’t bounce.
The latest ANZ-Roy Morgan consumer confidence index jumped by 3.3% to 118.1, leaving it well above the series long-run average of 112.8.
It also helped to snap two weeks of sharp declines, and left the 4-week moving average — a better overall gauge on the trend in confidence levels — at 118.2, the highest level seen since late 2013.
Fitting with the news surrounding the economy, it was no surprise that the strength was concentrated in views towards the economic outlook — the areas that has suffered the largest decline in the previous two weeks.
“Households’ views of the 12 month economic outlook jumped 8.1%, while views of the five year economic outlook rose a solid 4.6%,” said ANZ, acknowledging that while they have been volatile in recent weeks “they both remain on an upward trend”.
Outside on views towards the economy, the other components of the survey were mixed.
Perceptions towards current consumer finances rose by 1.6%, taking the subindices’ 4-week moving average to the highest level seen since before the GFC, while those towards the year ahead dipped 0.3%.
Views on whether now was a good time to buy a major household item surged by 3.9%, completely reversing the decline seen in the previous week.
Four out of the survey’s five subindices improved — not a bad result.
Looking through the weekly volatility, Felicity Emmett, head of Australian economics at ANZ, believes that households remain optimistic about their finances and more confident about the economy, especially in the near term.
“Last week’s read on confidence looks to have been boosted by the Q2 GDP report, which showed solid economic growth for the quarter and a twenty five year run of uninterrupted growth. More broadly, the report showed that the recovery in non-mining activity continues to gain traction, with housing being a key driver of growth,” she said.
However, while the data helped to lift confidence levels, Emmett notes that recent strength in confidence levels “did not translate into stronger consumer spending in Q2”, calling the result disappointing.
“Consumption has been a key driver of the non-mining recovery and this step down in growth is somewhat concerning, and something we will be closely watching over the next few months,” she noted.
Looking ahead, Emmett believes that the key driver of sentiment remains labour market conditions, suggesting that “this week’s employment data will be important for the near term direction of consumer confidence.”
Economists are looking for an increase in employment of 15,000 in August, leaving the unemployment rate steady at 5.7%.
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