Australian consumer confidence bounced strongly last week, moving back towards levels not seen since early 2014.
The latest ANZ-Roy Morgan consumer confidence index jumped 3.1% to 116.3, retracing much of the declines recorded over the previous three weeks. The index now sits 3.2% above its long-run average of 112.7, a welcome development heading into the all-important Christmas trading period.
Adding to the impressive headline bounce, all five survey subindices registered improvement from a week earlier. Perceptions towards family finances, both looking back a year and at present, registered increases of 3.0% and 5.4%, while those for the economy looking one and five years ahead bounced by 3.3% and 4.0% respectively.
The final component of the survey – whether now is a good time to buy a major household item – increased by a smaller 0.5%, suggesting consumers may be willing to increase spending in the lead up to Christmas.
Felicity Emmett, co-head of Australian economic at the ANZ, believes last week’s Q3 GDP report – something that revealed the Australian economy grew 0.9% in the three months to September – may have been responsible for the impressive bounce in sentiment.
Signs of a downward trend in confidence over the past few weeks have been reversed with this week’s bounce. More positive news flow around the economy may have lifted overall confidence with both retail trade and the official numbers on GDP growth showing the Australian economy growing at a better-than-expected rate.
It is also possible that consumers are also starting to feel more optimistic as we enter the Christmas season. While it is now above its long run average (3.2%), it will be important for confidence to remain elevated to help support consumer spending in the crucial Christmas shopping period.
While on the surface the headline GDP growth figure was strong, as many analysts have noted, had it not been for a significant contribution from external trade – something that was partially due to a reversal of weakness in the June quarter – the economic growth rate would have been significantly less than the level reported by the ABS.
Given this temporarily boosted economic growth, and is unlikely to impact households significantly, it raises questions as to whether the improvement in near-term improvement in sentiment can be sustained over the medium to longer term.
Given sentiment levels in the ANZ-Roy Morgan survey appear to be driven by major economic data at present, one suspects that the November jobs report released by the ABS later in the week will be influential on sentiment levels during the next survey period.
Markets are looking for employment to decline by 10,000 following a substantial increase in October, leaving the unemployment rate slightly higher at 6.0%.