The ANZ-Roy Morgan Research consumer confidence index continued to recover in the week ended 26 July, rising 0.7 points to 112.5 to be tracking around the long-run average of around 113 points (see next chart).
ANZ Chief economist, Warren Hogan, welcomed the result but cautioned that it is unlikely to translate into higher consumer spending:
“The fact that confidence has held the previous week’s bounce is a positive sign that confidence could continue to recover in coming weeks in the absence of further market volatility. More broadly, consumers continue to hold a more positive view towards their financial situation, relative to economic conditions. The minutes from the July RBA meeting pointed out that more positive views on personal finances likely reflect low interest rates and high household wealth. However, households’ confidence in their finances is not translating into the same strength in consumer spending as seen in previous cycles (Figure 3). This is likely to be driven by weak wages growth and consumers continuing to pay down debt. As such, consumer spending is likely to remain below trend and a key impediment to a lift in economic growth.”
Moreover, given the Chinese stock market crashed overnight, there is a strong likelihood that next week’s report will be pessimistic.
The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index:
Both are underwhelming.