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Confidence moderates from 4-month high
Consumer sentiment
Consumer confidence: The weekly ANZ/Roy Morgan consumer confidence rating fell by 1.2 per cent to 115.0 last week. Confidence remains above the average of 113.2 since 2014 and its long-run monthly average of 112.9 since 1990. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.
What does it all mean?
It was a more subdued Aussie consumer last week. Perhaps this was expected after sentiment had risen to 16-week highs the previous week on the back of ‘good news’ stories around the marriage equality plebiscite and the Socceroos football World Cup qualification.
The Aussie dollar increased by 0.7 per cent over the week to US76.25 cents, but is down 0.9 per cent so far this month (to November 27). This could potentially have a negative impact on consumers who look forward to visiting family and friends overseas at Christmas.
Aussie sharemarkets were likely a benign influence on consumer confidence given the near flat (+0.4 per cent) weekly outcomes for both the ASX200 and All Ordinaries indices over the week.
Consumers are becoming increasingly wary about rising petrol prices, weighing on their views on current financial conditions. Aussie households are contending with increased spending on motor vehicle fuel, stretching budgets in the lead-up to Christmas. Prices are now at 28-month highs and are likely to stay elevated given peak pricing cycles across most Australian metropolitan cities and regional areas. The Brent crude oil price is currently near 2-year highs as global oil producers attempt to limit output in an attempt rebalance the oil market.
The underlying results of the survey were mixed. While three out of the five sub-indices fell, views towards current economic conditions remain above their long-term average. And views towards future financial conditions rose 1.6 per cent last week, following a 3.0 per cent rise previously. Record low interest rates, benign inflation and strong jobs growth are likely contributing to these more favourable outcomes.
The Department of Employment’s Skilled Internet Vacancies index – released during the week – rose for a twelfth consecutive month in October and is up 8.4 per cent over the year at 5-year highs. Leading indicators suggest scope for further improvement in labour market conditions, which is supportive for consumer confidence over the coming months.
Sentiment around the ‘time to buy a household item’ improved 0.5 per cent, bringing this sub-index back to its long term average of 133.8. Retailers would be encouraged by this in the all-important lead up to Christmas trading.
The measure of inflation expectations, 2 years ahead, fell from a 7-week high of 4.6 per cent in the previous week to 4.4 per cent last week.
What do the figures show?
Consumer sentiment
The weekly ANZ/Roy Morgan consumer confidence rating fell by 1.2 per cent to 115.0 last week. Confidence remains above the average of 113.2 since 2014 and long run monthly average of 112.9 since 1990.
Three of the five components of the index fell in the latest week:
• The estimate of family finances compared with a year ago was down from +6.5 to +4.1;• The estimate of family finances over the next year was up from +24.5 to +26.5;• Economic conditions over the next 12 months was down from +7.4 to +3.8;• Economic conditions over the next 5 years was down from +10.6 to +7.0;• The measure of whether it was a good time to buy a major household item was up from +33.1 to +33.8.
The measure of inflation expectations 2 years ahead fell from a 7-week high of 4.6 per cent to 4.4 per cent.
What is the importance of the economic data?
The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
What are the implications for interest rates and investors?
Consumer confidence remains above long-term average levels but the weekly readings remain volatile.
Aussies are fickle at the moment. Good news stories are boosting the national psyche from time to time but low wages growth, as highlighted by the Reserve Bank Governor Philip Lowe recently, are weighing on consumer spirits.
Rising petrol prices and utility bills are pressuring household budgets in the lead-up to Christmas. However this is counterbalanced by improving job security, retail deflation and record low interest rates.
Retailers will be heartened that consumers are again considering buying major new household goods.
CommSec expects official rates to remain unchanged until at least late 2018.
Originally published by Ryan Felsman, Senior Economist, CommSec