The sticker-shock from Australia's weak GDP report appears to have already worn off

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  • Australian consumer confidence rebounded last week, led by improved sentiment towards family finances and near-term expectations for the economy.
  • Household spending is the largest part of the Australian economy. It was very weak in the second half of last year. That means confidence levels are being tracked closely.
  • Confidence may have risen more than the reported about had it not been for the tragic events in Christchurch late last week.

The sticker-shock from Australia’s weak Q4 GDP report, including news the economy entered its first “per capita” recession since the mid-2000s, appears to have already worn off for many households.

After tumbling in the immediate aftermath of the report, the ANZ-Roy Morgan consumer confidence index rebounded strongly last week.

According to ANZ, the headline confidence index rose 2.2% to 113.1, recouping around half of the falls seen following the GDP report. Despite the rebound, overall sentiment still remains just below the long-run average.

ANZ Bank

Current financial condition jumped by 6%, having fallen in the prior three weeks, while sentiment toward future financial conditions also rose by 1.7%.

Views towards economic conditions in the year also improved, lifting by 4.8% having fallen 7.9% in the prior week. However, sentiment towards the economy over the longer-term was largely unchanged in the latest survey.

Currently, confidence towards family finances sits above the series long-run average, helping to offset below-average sentiment towards the economy.

ANZ Bank

The final component in the weekly survey — whether now is a good time to buy a household item — fell for a third consecutive week, leaving it at levels last seen in October last year.

While that points to continued weakness in household spending, the modest rebound in confidence levels last week lessens the risk that the consumer-led slowdown in the economy in the second last year may not be getting worse. A further recovery in confidence ahead would help to bolster that view.

It’s also noteworthy that the latest survey was conducted after the tragic events in Christchurch last Friday, meaning confidence may have risen more than the reported amount had that not been fresh in the minds of survey respondents.

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