Australian consumer sentiment just dipped sharply again, after steadying over the previous two weeks.
The ANZ-Roy Morgan weekly consumer confidence index fell by 3.8% last week. The result was driven by declines in views towards the broader economy, which plummeted.
While the index is subject to weekly volatility, the latest result appears to reflect a continuation the 2017 trend — Australian consumers are feeling the pain.
The familiar themes of low wage growth and high household debt are still apparent, while more recently the prospect of cooling house prices and higher energy costs have further weighed on sentiment.
Despite a solid GDP report last week, views towards current and future economic conditions both crashed — by 8.1% and 7.2% respectively.
That leaves household confidence towards the broader economy at a four-month low:
ANZ’s head of Australian economics David Plank pointed out that despite the contribution of domestic consumption to the GDP figure, the spending was driven in part by a reduced savings rate.
“Despite the solid Q2 GDP reading last week, confidence has failed to hold onto the previous week’s gains,” Plank said.
“The Q2 GDP data showed the rise in consumer spending was largely supported by a lower saving rate – while wages and overall household income growth remained very weak.”
Despite concern around the reduced savings rate and how long it can continue to fall, views towards household finances held up better in last week’s survey.
Views towards current financial conditions slipped by 0.3%, but views towards future financial conditions saw a solid 3.7% rise.
“Looking through the weekly volatility, confidence in overall financial conditions has remained broadly unchanged over the past two months, hovering around its long term average,” ANZ said.
This morning’s result will be interesting to assess in conjunction with the NAB business confidence index at 11:30am AEST.
While consumer sentiment surveys continue to languish, Australian businesses appear more confident than ever with the NAB index hitting its highest level since 2008 last month.
ANZ’s Plank expects the broader health of the labour market to provide baseline support for consumer sentiment, but said a meaningful pick-up in the index still appears some way off.
“Looking forward, we expect labour market conditions to continue improving given the strength in job ads and business conditions,” Plank said.
“This should broadly support consumer confidence, although we are unlikely to see a material increase until wages growth starts to pick up more meaningfully.”