Consumer confidence hangs on

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By Leith van Onselen

After four consecutive weekly falls, the ANZ-Roy Morgan consumer confidence index has registered its first increase for 2016, rising 0.2 points to 111.4, but is still tracking below the long-run average of 112.7 (see next chart).

ScreenHunter_11435 Feb. 09 09.52

The improvement was driven by a big lift in the time to buy a major household item (up 2.8%).

ANZ’s co-head of Australian economics, Felicity Emmett, noted the following in explaining the reading:

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International events have clearly played a part in the weakness in consumer confidence over recent weeks. As a small, open economy, Australia remains vulnerable to the fortunes of the global economy. The domestic economy, however, is currently not in bad shape, with the unemployment rate improving significantly over recent months. A solid rise of 1% in the ANZ measure of job ads in January suggests the near-term employment outlook remains positive, which should play some part in supporting consumer confidence.

The question will be whether this translates to stronger spending. This is what the RBA is banking on – a return to above trend consumer spending. Last week’s December retail numbers were disappointing and suggest that household consumption growth remains moderate at best. Further improvements in the labour market and confidence are likely to be required to drive a stronger recovery in consumer spending.

Same old same old.

The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index, with both still below their long-run average levels:

ScreenHunter_11436 Feb. 09 09.52
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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.