Aussie consumer confidence dead cat bounces

The weekly ANZ-Roy Morgan Consumer Confidence Index has been released, with confidence rebounding 3.7%; albeit remains at recessionary levels:

Australian consumer confidence

According to ANZ Head of Australian Economics, David Plank:

Consumer confidence increased 3.7% last week, possibly helped by the state budget initiatives in NSW and Queensland. Confidence increased by 4.3% and 5.2% in NSW and Queensland respectively.

Household inflation expectations dropped 0.2ppt to 5.7%, despite an increase in the average petrol price over the week.

The sub-index capturing whether it is a good ‘time to buy a major household item’ has jumped 14.2% over the past two weeks and was the biggest driver of last week’s gain in confidence.

The improvement in sentiment doesn’t mask the fact that it remains exceptionally weak, with all sub-indices well below neutral. We expect this week’s retail figures for May to confirm that spending is holding up despite low confidence.

The next chart shows that inflation expectations have almost rebounded back to April’s peak before the federal government halved the fuel excise:

Inflation expectations

The next chart plots the consumer confidence index over the very long term, with confidence tracking around the lowest level since the early-1990s recession:

Long-run confidence

The Reserve Bank has never commenced a rate-tightening cycle with such low consumer confidence. This spells bad news for the economy, given household consumption is the economy’s biggest driver.

Unconventional Economist
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