The glow of the federal budget is now starting to fade on Australian households with the ANZ-Roy Morgan consumer confidence index slipping 1.2% to 112.1 last week.
The decline, the second fall in a row, takes the index back below its long-run average, if only by 0.6%.
In what is a worrying lead indicator for consumer spending moving forward, weakness in the report was broad based with perceptions towards the economic outlook falling heavily, while those towards family finances slipped back to level seen prior to the federal budget.
Reflective of that view, ANZ chief economist Warren Hogan believes consumer spending looks set to remain in the doldrums.
Consumer confidence fell last week to levels just below long-run average. It’s disappointing to see the boost that consumer confidence saw around the time of the Budget start to be unwound. As we have noted previously, the lift to confidence needs to be sustained to feed into stronger household spending. Last week’s Q1 GDP report showed that growth in consumer spending remains soft, with weak growth in household incomes weighing on spending. April retail sales were also disappointing. Ongoing soft growth in wages is likely to remain a constraint on spending, even with a lower saving rate. And if confidence proves unable to sustain the recent bounce, growth in consumer spending looks set to stay in the doldrums.”
Interestingly, while perceptions towards the economy and family finances all fell, the only measure to register an increase was whether now was a good time to buy a major household item which surged 4.8%.
- Financial situation compared to a year ago: 103.6 (-1.8%)
- Financial situation next year: 120.8 (-1.2%)
- Economic conditions next year: 93.7 (-2.3%)
- Economic conditions next five years: 104.5 (-6.7%)
- Time to buy a major household item: 137.8 (+4.8%)