Consumer finances are the best in five months
Weekly consumer sentiment

Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 0.3 per cent to 116.3 points. Consumer sentiment remains above the average of 114.4 points held since 2014 and the longer term average of 113.1 points since 1990.

Consumer finances: The estimate of family finances compared with a year ago was up from +10.0 points to +13.1 points – the highest reading since February.

The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.

What does it all mean?

• Aussie consumers are in reasonable spirits. And why not? Perhaps petrol prices could be a touch lower and the Aussie dollar could be a touch higher – consumers would love to see both. But apart from these factors, Aussie families have good reason to be upbeat. The sharemarket is not far off record highs; interest rates are at record lows; the record-breaking economic expansion continues; tax cuts will filter through in coming weeks; and elections are out of the way.

• Aussie consumers are looking at the state of their finances and concluding that they are in better shape than a year ago. Further, finances are expected to improve over the next year.

• Aussie consumers reckon that their finances is the best in five months (since February 3). Indeed, there have only been a handful of more positive readings over the past five years. Readings on the current and future state of family finances tend to be correlated with consumer spending.

• Over July to date, both Sydney and Melbourne homes prices are up 0.1 per cent on the prior month. The stabilisation of home prices in the east will give consumers more reason to get back to some normality on spending. But what would really help matters is evidence that wages are growing at a faster rate.

What do the figures show?
Consumer Sentiment

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 0.3 per cent to 116.3 points. Consumer sentiment remains above the average of 114.4 points held since 2014 and the longer term average of 113.1 points since 1990.

• Four out of the five major components of the index rose last week:

The estimate of family finances compared with a year ago was up from +10.0 points to +13.1 points;

The estimate of family finances over the next year was up from +25.2 points to +25.6 points;

Economic conditions over the next 12 months was up from +2.3 points to +5.8 points;

Economic conditions over the next 5 years was up from +8.0 points to +9.1 points;

The measure of whether it was a good time to buy a major household item was down from +33.8 points to +27.9 points.

• The measure of inflation expectations rose from 4.1 per cent to 4.2 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?

• Aussie consumers are generally positive. The extra good news for retailers is that there is a range of financial variables to boost spending: rate cuts, tax cuts and the lift in the minimum wage. Further, recent data suggests that Aussie businesses are again actively advertising for staff with the election out of the road.

• The Reserve Bank is expected to ‘sit pat’ on rates for now, assessing incoming economic data over the coming months before deciding the next move for the cash rate. But the Reserve Bank Board stands ready to act (cut rates further), “if needed” to support the economy and job market.

• The next key event is a speech by the Reserve Bank Governor on Thursday.

 

Published by Craig James, Chief Economist CommSec