Consumer confidence edges higher but risks still remain

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Australian consumer confidence steadied last week, with households not so bearish on the near-term economic outlook.

After falling for two straight weeks, the ANZ-Roy Morgan Consumer Confidence survey rose slightly to 111.3 from 111.2. See here:

Household expectations for economic conditions over the next 12 months rose by 2%, after falling to their lowest level in over a year last week.

With near-term confidence steadying, confidence in the outlook over a 5-year time horizon also ticked higher by 0.7% but remains generally subdued. This chart shows the recent downturn:

ANZ head of Australian Economics David Plank said lower confidence in April was due to a combination of geopolitical risks and domestic economic factors.

“Most of the fall in average consumer confidence for the month of April was driven by some deterioration in households’ optimism towards the longer-term outlook and concerns around the economy,” Plank said.

“While some weakness in sentiment was likely the result of rising geopolitical fears, more structural factors (high household debt, low wage growth) are likely weighing on confidence.”

Concern about the housing outlook was probably reflected in how households viewed their finances, with sentiment about current finances rising 2.6% last week while sentiment about future finances dropped sharply by 3.6%.

Plank cited next week’s budget as historically being a key driver of consumer confidence, but said this year’s budget is unlikely to move the needle much.

“In recent years, the Budget has had a notable impact on consumers’ views towards the economy. We don’t expect any significant policy surprises that will hit households’ pockets in this year’s Budget, suggesting that any impact on confidence from this event may be modest.”

Consumer expectations for inflation ticked slightly higher in the latest reading, rising to 4.6% from 4.4% in the previous week.

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