Consumer sentiment in Australia fell sharply last week as Australian household’s views towards the broader economy reversed the previous week’s gains.
The ANZ-Roy Morgan Australian Consumer Confidence Index dived by 4%, driven by steep falls in the view toward current and future economic conditions.
Despite giving up most of the previous two weeks gains, the headline index had a reading of 113.7 — still slightly above its long-term average of 112.9:
Data for the survey is collected on the most recent weekend, and is based on around 1,000 face-to–face interviews.
Looking at the sub-indexes for household financial conditions, views toward current finances were the only major sub-index to post a gain. They climbed by 2.8% last week, offsetting a fall of 1.2% in the week prior.
However, consumers voiced their concern about the road ahead with the sentiment reading for future financial conditions falling for the third straight week, down by 2.3%.
Turning towards the broader economy, things got ugly.
“Sentiment around current and future conditions fell 10.7% and 7.3% respectively,” ANZ said.
However, the results should be viewed within the context of weekly volatility — last week’s falls followed respective gains of 12.3% and 8.2% in the week prior.
Despite the fall, sentiment towards current economic conditions remains just above its long-term average:
ANZ chief economist David Plank continued to take a cautious view toward a potential lift in sentiment, citing low wage growth and rising energy prices.
“Stepping back from the recent volatility in survey responses, consumer confidence remains above its long term average,” Plank said.
“That said, households continue to face a number of headwinds – subdued wage growth, slower growth in house prices and high household indebtedness – which will likely cap the rise in sentiment,” he added.
“In addition, higher energy prices will weigh on households’ disposable incomes. As such, we remain cautious about the outlook for consumer spending despite the solid Q2 retail sales outcome.”
The “time to buy a household item” index fell last week but remains above its long-term average, while the inflation expectations reading ticked up to 4.4% on a four-week moving average basis.
Plank said that the recent gains in monthly employment should help support consumer sentiment in the near-term, while keeping one eye on key data releases due out next week.
“Given the importance of the labour market to both near term confidence and monetary policy, we will be closely watching next week’s Wage Price Index and Labour Force releases,” he said.