ANZ-Roy Morgan Australian Consumer Confidence dropped 6.6pts to 106.7 this week, reaching the lowest level since July 2014.
This follows three weeks where confidence remained surprisingly resilient in the face of financial market volatility, holding up above its long run average.
However, consumers clearly remain sensitive towards bad news in Australia, notably last week’s newsflow around Australia’s weak economic growth.
The decline in confidence this week was broad based, with sub-indexes on financial and economic conditions all falling to nine week lows.
The subindexes on economic conditions fell 5.7% and household finances fell 4.5% last week.
Consumers’ views about whether ‘now is a good time to buy a major household item’ fell 8.4%, reaching the lowest level since May 2014.
Co-Head of Australian Economics Felicity Emmett commented:
“ANZ-Roy Morgan Australian Consumer Confidence fell 5.8% and is now sitting at the lowest level since July last year. While confidence held up in the face of financial market volatility recently, data last week showing weaker conditions at home appear to have hit household sentiment. In particular, weak June quarter GDP and an unexpected fall in July retail spending seem to have rattled consumers. The magnitude of the fall in confidence is concerning, being the largest weekly fall we’ve seen since around middle of 2012. This highlights consumers’ fragility in the current economic environment.
“Interestingly, views on purchasing a household item have reached the lowest level since May last year, when confidence plunged in response to the 2014-15 Commonwealth Budget. Combined with the drop in households’ view of their own finances as well as slower house price growth, this suggests that the outlook for retail is likely to remain challenging.”
Why I track consumer confidence
Consumer confidence is an economic indicator measuring the degree of optimism consumers have about the state of the economy, as well as their own personal finances.
The level of confidence determines a person’s willingness to spend, borrow and save.
If confidence is high, people are going to be more willing to invest in property, buy a new home and generally just spend more money.
If confidence is low, people are more likely to sit back and “wait to see what happens” – causing a negative impact on the property market.