Consumer confidence holds at average

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By Leith van Onselen

The ANZ-Roy Morgan Research consumer confidence index continued to recover in the week ended 2 August, rising 0.4 points to 112.9 to be tracking around the long-run average of around 113 points (see next chart).

ScreenHunter_8629 Aug. 04 09.50

Three of the survey’s five components improved over the week, with family finances up 3.61% to the highest level on record, and views on the economic outlook in the year ahead (+5.70%) and out five years out (+1.83%) improving. These were partly offset by falls in perceptions of family finances in the year ahead (-1.61%) and whether now was a good time to buy a major household item (-5.04%).

According to ANZ chief economist, Warren Hogan, Australian consumers remain vulnerable to bad economic news, which is being reflected in the recent volatility of the survey. High debt levels and poor wages growth are also dragging down confidence:

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The underlying drivers of confidence reflect the complexity of forces affecting the Australian economy at present. Three weeks ago consumers’ views on the long-term economic outlook sank to the lowest level since the weekly survey began in 2008, but have recovered somewhat since. This week consumers’ views on their own finances right now have hit a new high point. In essence, Australian consumers are happy with their financial position but are very worried about the outlook. High debt levels across the household sector, the weakest income growth since the 1960s, a flat labour market, and concerns over retirement incomes are all apparently at work here.”

Given these factors, Hogan believes that “in this environment we expect consumer demand to remain on an even footing but will not grow strongly”.

The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index:

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ScreenHunter_8630 Aug. 04 09.52

Both remain fairly subdued.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.