The ANZ-Roy Morgan Research consumer confidence index retraced by another 0.9 points to 113.2 in the week ended 17 January, to be tracking marginally above the long-term average (see next chart).
The fall in confidence was driven mostly by concerns surrounding the Australian economy. Specifically, the sub-index tracking the economic outlook over the year ahead fell for a fourth consecutive week to the lowest level since Malcolm Turnbull became Prime Minister. Perceptions towards the economic outlook over the next five years also deteriorated, falling to levels not seen since early-October.
Commenting on the result, Felicity Emmett, co-head of Australian economics at ANZ, questioned whether the recent financial market ructions will become become entrenched, holding-down confidence:
While this week’s fall in confidence may be impacted by ongoing global concerns and share market weakness, subsequent readings will be crucial in assessing whether these concerns have a short-lived impact or reflect a more persistent shift in consumer confidence. The impact of financial market instability is a reminder that global shocks provide ever-present risks for a small open economy like Australia.
Emmett also questioned whether the housing-related bounce in jobs is sustainable:
On a more positive note, conditions in the labour market are expected to remain strong in the near term and will be a positive factor for consumer confidence and the Australian economy in the short term. Over the 12-18 month outlook however, challenges from a shaky global backdrop and a softening housing moment will weigh on economic growth and consumer confidence.
The below chart plotting the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index shows that confidence levels are neither bad nor good at the moment:
Looking further ahead, our view is that when the housing market starts correcting later this year, coinciding with the ongoing slump in commodity prices and mining investment, as well as the closure of the car industry from October 2016, then consumer confidence (and the economy) will get smashed.
