Australian consumer confidence moved lower last week as consumers assessed the impact of higher energy costs on household finances.
The index fell by 0.4% to a reading of 112.4, slightly below its 4-week average of 112.6.
Beneath the headline figures, there was significant volatility. Views towards economic conditions rose slightly, but views towards household’s financial conditions reversed sharply.
Last week’s gain of 9.4% in current financial conditions turned out to be a temporary spike, as the index fell back sharply by 8.1% in the latest reading.
According to ANZ senior economist Jo Masters, the reversal was due at least in part to reports last week that energy prices were set to increase from July 1.
“The volatility in the sub-indices is a timely reminder of the headwinds facing households, with the sharp fall in current finances last week likely reflecting news of large energy price rises from 1 July,” Masters said.
Looking at the broader economy, consumer’s views about current economic conditions stabilised with a 0.6% rise after last week’s 5.2% drop in the wake of poor Q1 GDP figures.
In addition, views towards future economic conditions jumped by 2.8%, which more than offset last week’s 2.6% fall.
According to Masters, the turnaround in broader economic sentiment can be attributed to consumers turning their focus to some stronger data reports last week.
Chief among those was Australia’s monthly employment report, which beat expectations with the economy adding 42,000 jobs against a forecast of 10,000.
“Consumers seemingly agree with the RBA’s assessment that the weakness in GDP is temporary and have chosen to focus on the recent string of solid employment reports, including last week’s data, which showed a sharp drop in the unemployment rate to 5.5% in May, the lowest since March 2013,” Masters said.
In summary, consumer confidence about current financial conditions has recently ticked up to be tracking around its long-term average.
Although confidence around economic conditions remains well below the long-term average, recent results shows that it has stabilised after steady falls since the start of this year.