While the monthly Westpac-MI consumer sentiment gauge plummeted last week, completely erasing its post-budget bounce, not all sentiment gauges suggest that household confidence is falling off a cliff at present.
According to the latest weekly ANZ-Roy Morgan consumer confidence survey, sentiment jumped 2.1% to haul back losses seen in the previous three weeks, with the index now back above its long-run average.
Crucially in terms of a potential lift in household spending in the months ahead, it has largely retained all of the gains seen following the release of the federal budget.
According to the ANZ, the increase was driven by both an improvement in the outlook for the economy and family finances, two indicators that fell heavily in the rival Westpac-MI survey during June.
ANZ co-head of Australian economics Felicity Emmett believes last week’s unemployment numbers, something that revealed a hefty jump in employment and a decline in unemployment, may have been the catalyst behind the improved sentiment reading.
“Consumer confidence bounced last week, reversing almost all of the fall in the previous three weeks. The bounce in employment numbers and the fall in the unemployment rate seems to have sent a positive signal, which is being reflected in consumers’ view towards future financial and economic conditions. While a lift in consumer expectations is an encouraging sign, they remain well below long run averages and a sustained bounce is required to generate stronger growth in household spending. While weak wages growth is helping to support better employment outcomes, it is difficult to see how an economy growing below trend can continue to create enough jobs to absorb solid growth in the labour force”.
Here’s a breakdown of the survey’s subcomponents for the week.
- Financial situation compared to a year ago 102.8 (-0.8%)
- Financial situation next year 125.1 (+3.6%)
- Economic conditions next year 97.5 (+4.1%)
- Economic conditions next five years 109.0 (+4.3%)
- Time to buy a major household item 138.1 (+0.2%, highest since Aug 2014)