The ANZ-Roy Morgan consumer confidence index has been released, with the index bouncing 2.1% last week – the third consecutive weekly rise – on lower petrol prices:
The main movements were as follows:
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- Consumer confidence gained 2.1% last week, its third consecutive weekly increase. Among the mainland states, confidence improved in Queensland and SA, while it dropped slightly in NSW, Victoria, and WA.
- ‘Weekly inflation expectations’ dropped 0.5ppt to 5.5%, its lowest level since late May. Its four-week moving average fell 0.1ppt to 5.8%.
- Four of the five confidence subindices registered gains. ‘Current financial conditions’ rose a touch by 0.5%, while ‘future financial conditions’ increased 5.3%.
- ‘Current economic conditions’ gained 1%. ‘Future economic conditions’ rebounded 3.6% almost reversing the 3.9% fall the week before.
- ‘Time to buy a major household item’ decreased 1.5%, bucking the overall trend.
ANZ Head of Australian Economics, David Plank, noted that the rebound in confidence was driven by falling petrol prices:
Consumer confidence rose 2.1% last week, despite news that headline inflation exceeded 6% in the year to June. The sharp fall in petrol prices over the past three weeks may have been more important for sentiment. The drop likely explains why household inflation expectations fell 0.5ppt to 5.5%. The only confidence sub-index that decreased was ‘good time to buy a major household item’ – ongoing weakness in the housing market and pressure on household budgets being likely reasons. Despite the gain in in the past three weeks, sentiment remains at a very low level and vulnerable to more tightening from the RBA.
Indeed, inflation expectations retraced from their recent highs:
The next chart plots the longer-term picture, and shows that consumer confidence is still tracking at recessionary levels:
With the RBA expected to hike the cash rate another 0.5% this afternoon, with more to come, it is inevitable that consumer confidence will remain depressed.