The ANZ-Roy Morgan Research consumer confidence index tanked another 2.7% in the week ended 12 July, slumping 4.0 points to a 12-month low of 107.0, and now tracking well below the long-run average of around 113 points (see next chart).
After turning bullish two weeks ago, ANZ chief economist, Warren Hogan, continued to blame the turmoil in China and Greece for the sudden plunge in sentiment:
“Consumer confidence has plunged a sharp 8% in the past two weeks, reaching a twelve month low. This follows an eight month high just three weeks ago. The rapid turnaround in sentiment highlights the sensitivity of consumers towards both domestic and global conditions.
Chinese stock market volatility and current negotiations surrounding Greece have dominated the news flow over the past two weeks and spilled over into the local share market. Despite the stabilisation in the unemployment rate, ongoing weakness in consumer confidence would present a risk to the outlook for household spending”.
This week’s decline in confidence was driven by perceptions about the economic outlook, both in the year ahead (-7.7%) and out five years (-7.8%), with the latter falling to the lowest level since the survey began in October 2008.
Even without the ructions in China/Greece, stiff headwinds remain that will weigh on confidence in the years ahead.
Iron ore prices will continue to head lower over the second half, draining national income. And Australia still faces large falls in mining capex and the shuttering of the local car industry through 2016 and 2017.
The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index:
Both indices are now looking weak.
