The ANZ-Roy Morgan consumer confidence index registered a big rise in the week ended 6 March 2016, jumping 3.5 points 114.8, to be tracking above the long-run average of 112.7 (see next chart).
The overall jump in confidence was driven by a combination of last week’s superficially strong GDP release, combined with the rebound in the share market and the stronger Aussie dollar.
Accordingly, perceptions towards the economy improved, with the sub-index measuring expectations for the year ahead jumping by 11.6%, whereas the index looking five years ahead rose by 8.6%.
According to Warren Hogan, chief economist at ANZ:
The bounce in consumer confidence in the past week was underpinned by a strong bounce in the economic outlook subindices. Australian’s perceptions of the economic outlook would have been bolstered by the stronger than expected GDP data released mid-week. Last week also saw good gains on the currency and equity markets. By and large, property markets remain strong. Confidence has been volatile of late, reflecting the conflicting and often complex forces impacting the economy.
The good news is that the ‘pulse’ of confidence appears to be at or a little above long-run average levels. Australians can, in general, be described as being confident about the economy despite some ongoing worries about the long-term. The bad news is that these conflicting forces, including political and policy uncertainty, are likely to persist.
It now looks like 2016 is shaping up as a solid year for economic growth, albeit a little slower than last year. The strong bounce in commodity and equity markets in the past few weeks augers well and should support business confidence and hiring intentions. The extent to which this translates into employment growth will be central to the performance of the economy this year.
Given the bubble is behind the boost to GDP and employment, in the face of ongoing weak incomes growth, my view remains that confidence will turn down once housing turns down in the second half.
Nevertheless, the below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index, with both at reasonable but unspectacular levels:
