Consumer Confidence Consolidates

ANZ-Roy Morgan Australian Consumer Confidence rose 1.6% to 115.2 this week.

Despite recent moves by the big four banks to raise variable mortgage rates, this week’s result confirms that overall consumer confidence remains on an upward trend, most likely reflecting the increased faith in the newly elected PM.

The four week moving average is now at its highest level since February 2014.

• Confidence about the economic outlook has surged since Turnbull’s election as Prime Minister.
  The subindex ‘economic conditions in the next 12 months’ rose 5.1% last week, and is now 25% higher than prior to the change in Prime Ministership.
  Consumers’ views towards ‘economic conditions in the next 5 years’ fell 3.3% last week, but is 9.5% above levels seen prior to Turnbull’s appointment.
• Consumers’ views towards their ‘finances compared to a year ago’ bounced 6.7%, reversing the falls seen in the previous two weeks, which were driven by the banks’ lending decisions.
  Confidence on ‘finances in the next year’ also rose 1.5%, lifting overall confidence.

ANZ Chief Economist Warren Hogan commented:

“It is encouraging to see that consumer confidence has remained elevated above its long run average in the past few weeks.

The significant improvement in consumers’ view towards the economic outlook has been important in this trend, with confidence in the new government appearing to offset the recent increases in variable mortgage rates and signs of slowdown in house price growth.

“Households will be looking for the Turnbull Government to deliver a clear and credible economic platform to return the economy to trend growth.

This will be critical in the face of a slowing housing market.”

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.