The ANZ-Roy Morgan Research consumer confidence index bounced back hard in the week ended 11 October, jumping 5.6 points to 115.6 to be tracking above the long-run average of around 113 (see next chart).
The jump in confidence was broad-based across the sub-indices, but was largest for economic conditions in the next five years and personal finances in the next 12 months, which posted gains of 10% and 6.6% respectively.
ANZ chief economist, Warren Hogan, believes the recovery in the Australian share market (+4.5%) and the dollar (+4%) may have been behind the confidence jump:
“Consumer confidence climbed to a 15 week high last week, confirming an uplift in momentum since the appointment of Prime Minister Malcolm Turnbull. The lift in confidence has coincided with a rise in equity markets and a stronger Australian dollar, suggesting confidence is in some part tied to financial market sentiment.
The strong rise in views towards the economic outlook likely reflects faith in the Turnbull government. To sustain confidence at this level, however, the government needs to present a clear economic story to the country. This is necessary in the current economic environment, where there are numerous headwinds to sentiment and economic activity including soft wages growth, weak investment and an easing outlook for the housing sector.”
Given that the rises in stocks and the dollar were bear market rallies, it’s probably safe to assume that the jump in confidence was as well.
Regardless, the below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index:
