One of the factors I like to look at when assessing the short term future of our property markets is consumer confidence and consumer spending habits.
You see…there is a strong correlation between consumer confidence and property sales volumes and sales prices.
In a recent report ANZ Bank explained consumer spending has continued to moderate so far this year.
The Q1 national accounts showed household consumption growth was surprisingly soft, rising a modest 0.5% q/q after an average quarterly gain of around 0.7% over the previous few quarters.
Weakness was evident in spending on goods, which fell 0.3% q/q, while services consumption rose 0.8% q/q.
Since then, retail sales growth has stepped down further, rising only modestly in April while the negative news flow related to the Commonwealth Budget combined with unseasonably warm weather is likely to have weighed on spending in May.
Indeed, although confidence has clawed back some of the earlier weakness, it remains 9% lower than the levels since in mid-to-late April.
While the level at which confidence settles will be important for the consumer spending outlook – and for the economic outlook more broadly – the generally improved tone in the media (and reduced likelihood of many of the measures passing the Senate) could mean some further recovery in confidence is in prospect.
ANZ forecasts household consumption growth to remain moderate this year, amid soft income growth, before improving next year as the non-mining recovery gathers momentum.
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