If consumers were concerned about the composition of Australia’s bumper March quarter GDP result, it has not been seen in household confidence levels. Indeed, based on the latest ANZ-Roy Morgan weekly consumer confidence index, it’s now back at the levels not seen since January 2014.
Yes, Australian consumer haven’t been this confident in over two years.
The surveys headline confidence index surged by 3.2% to 116.8, leaving it well above the surveys long-run average of 112.8.
According to ANZ, the improvement was likely driven by the solid GDP report released last week, something that revealed the Australian economy grew by 3.1% in the 12 months to March, the fastest year-on-year expansion seen since the third quarter of 2012.
“The increase in confidence was broad based, with consumers’ views of the economic outlook leading the gains,” said ANZ
“Views towards ‘economic conditions in the next 12 months’ bounced a sharp 7%, and views towards ‘the economy in the next 5 years’ also rose strongly, up 3.5%.”
Mirroring the boost in perceptions towards the economic outlook, there were also solid increases recorded in sentiment towards personal finances, both now and in the year ahead.
“Consumers are also more optimistic about their finances with the indicator on ‘finances in the next 12 months’ bouncing 2.5% last week and ‘finances compared to a year ago’ up 0.5%,” noted ANZ. “While these series have been weaker recently, they remain well above their long run averages.”
The final component in the survey — whether now was a good time to buy a major household item — jumped by 2.7% to 140.2, leaving the subindex at the highest level seen since June last year.
Five from five when it came to the internal components of the survey, and a solid sign for household spending in the second half of the year should the gains be maintained beyond the short term.
Felicity Emmett, head of Australian economics, reflected that view.
“The improvement in views around household finances is encouraging for the outlook for consumer spending,” said Emmett.
“It has occurred alongside an improvement in the housing market, with prices and auction clearance rates showing an improvement over recent months. This, in turn, will help to further support confidence and spending.”
While she admits that the strong GDP result was the main factor behind the surge in confidence levels, whether that boost can be sustained will largely be determined by upcoming economic data along with the evolution of the federal election campaign, in her opinion.
“Going forward, we expect that confidence will remain sensitive to developments in the domestic economic data, as well as the evolution of the political debate in the lead-up to the July election,” say Emmett.