Australian household sentiment rebounded modestly to start the year with the latest ANZ-Roy Morgan consumer confidence survey increasing 0.8%.
At 116.3, the index is now well above its long-run average of 112.7, indicating that confidence levels are now well above their historic trend.
Perhaps buoyed by the “Santa Rally” in Australian stocks seen in late December, the improvement was led by a substantial increase in perceptions towards current family finances which leapt 6.4% to the highest level seen since the weekly survey began in October 2008.
The measure on whether now was a good time to buy a major household item also rose 2.5% to 138.7, taking the gauge back to levels last seen in mid-June 2015.
The improvement in both gauges is backed up by figures from the Australian Retailers Association (ARA) and Roy Morgan Research, which is predicting retailers will bank $16.8 billion between Boxing Day and January 15.
ARA executive director, Russell Zimmerman, called it a “spending frenzy”.
“While initially on December 26 we saw bigger ticket items walking off the shelves, now the focus has swapped to soft goods such as apparel and footwear, while household items have also been popular,” he said.
It’s good news for department stores, with the ARA expecting a 4.7% increase for the category compared to last year taking it to a $1 billion spend, second only in growth to the “other” category, up 6.1% percent to $2.3 billion.
Victoria takes the lion’s share of the post-Christmas shopping growth, up 5.6% to $4.2 billion across the 21-day period tracked, followed by NSW at 3.8% growth and $5.3 billion.
Here are the charts from the ARA and Roy Morgan, breaking down the figures:
However, on the ANZ-Roy Morgan consumer confidence front, partially offsetting those strong results, measures on family finances in the year ahead, along with the outlook for the economy, both weakened.
Warren Hogan, chief economist at the ANZ, suggests the gradual uptrend in confidence is a good sign for the economy in the period ahead.
Here’s his view on the survey’s findings.
Consumer confidence has increased a little since our last survey in mid-December to be back near its multi-year high point. Australian consumer confidence remains in a gradual uptrend, evident since the change of political leadership at the federal level in September last year and is starting 2016 a few percentage points above its long-run average.
While consumers are generally optimistic in January due to the holiday season, it is a good sign for the economy that consumers are particularly upbeat about their current financial situation. The 6.4% rise in the sub-index asking consumers about their current financial position is a new post-GFC high. This index is a reasonable indicator of consumer spending suggesting a strong Christmas and holiday spending period is underway. Stronger employment conditions and the falling petrol price appear to be the major factors driving consumer optimism.
A note of caution can be read into the indexes looking to the future. These fell and mostly remain below their long-term average levels. Next week’s ANZ job ads will provide further guidance on current employment conditions and the likely direction of consumer confidence over the remainder of the summer.
While true that the survey’s forward looking indicators are now trending lower, much of the decline is due to optimism over the change in Australia’s political leadership ebbing.
Those gains, much like actual political polling, were always likely to act as a sugar hit to confidence in the near-term.
As Hogan notes, the performance of Australia’s labour market will likely dictate how sentiment levels will fluctuate in the months ahead.
While there’s clearly a risk of some payback in the official ABS figures – the job gains reported in October and November were huge – should the current improvement in labour market conditions be maintained, it points to the likelihood that confidence levels will remain elevated in the months ahead.
Ask anyone. A job, or the potential to obtain new employment with a higher wage on the back of tightening labour market conditions, is likely to be significantly more important to households, and their spending patterns, than political movements in Canberra.
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