Consumer confidence has continued to edge up modestly, rising 1.0% to 103.2 in the week ending 15 June. While confidence remains 11% lower than at the end of April when negative news flow related to the Commonwealth Budget began, the modest increase over the past three weeks of around 4% is a tentative, encouraging sign that consumer confidence is beginning to recover.
The pace of recovery and the level that confidence eventually settles at will be important factors in determining the likely impact on consumer spending.
The key issue for confidence is whether the big declines witnessed around the release of the Federal Budget will prove transitory. The bounce we have seen in the past three weeks has not been large enough to make us comfortable that this will be the case. We would expect to see confidence recover another 3-5% over the next few months to be confident that the non-mining recovery remains on track.
I do not expect a full recovery until the next rate cut.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
