After three consecutive weeks of gains, Australian consumer confidence fell fractionally last week.
The ANZ-Roy Morgan index fell 0.4% to 112.5, marginally below the series long-run average of 112.7.
Despite the decline, confidence remains some 5.14% higher than last month.
Interestingly, while respondents indicated that their financial situation is likely to improve over the next 12 months, something that may have contributed to the sharp bounce in whether now was a good time to buy a major household item, concerns about the economic outlook – both short and long-term – continued to weigh on confidence.
The full breakdown of the surveys five components can be found below.
- Financial situation compared to a year ago 112.4 (-2.7%)
- Financial situation next year 125.7 (+2.9%)
- Economic conditions next year 95.0 (-1.5%)
- Economic conditions next five years 100.4 (-5.3%)
- Time to buy a major household item 132.3 (+3.2%)
The pessimism on the economic outlook is noted by Warren Hogan, chief economist at ANZ. In his view, the recent boost in confidence was driven by temporary factors, and is unlikely to last.
“Australian’s view on the economic and financial situation remains highly bifurcated. Questions relating to the here and now and the household balance sheet are highly favourable. Sentiment towards the future, particularly the medium to long term outlook for the economy, is extremely weak. The Australian consumer remains highly vulnerable to a negative economic or financial shock.
The outlook for consumer confidence remains key to a sustainable uplift in consumer spending. While the bounce in June retail sales was encouraging, it reflects a strong housing market and partial boost from the small business package in the Commonwealth Budget. The boost from the Budget is likely to be temporary and will dissipate in the coming months. In addition, housing will be less stimulative to retail sales into 2016 as higher interest rates for investors and other policies aimed at limiting investor housing lending growth slow house price growth (and thereby lessen the ‘wealth effect’ on retail). This means that it will be essential for other drivers of confidence and spending – namely jobs and wages – to lift as housing tails off”.
Given unemployment currently sits at a multi-decade high with wages growing at a multi-generational low, it’s understandable why consumers remain so pessimistic towards the economic outlook, and why the cautious consumer is likely to prevail for some time yet.