The latest ANZ-Roy Morgan Consumer Confidence Index shows a 2.5 per cent drop to 116 points in the week to March 11, dragged down by households’ pessimism towards current and future financial conditions, which fell 5.5 per cent and 1.0 per cent respectively.
Views towards current economic conditions declined 3.5 per cent in the past week, partially reversing the previous rise, and sentiment around future conditions slipped 1.9 per cent.
ANZ’s head of Australian economics David Plank says the broad-based fall in confidence reflects the disappointing GDP data released last week, which showed economic growth slowed to 0.4 per cent in the December quarter taking annual growth to 2.4 per cent.
“Much of the commentary centred on the fact that living standards per person have gone nowhere over the past year, something that may have resonated with the personal experience of many people,” Plank said in a statement on Tuesday.
“While the number was a touch disappointing, we believe some of the weakness is likely to be temporary and we expect a better performance in 2018.”
Household consumption drove growth in the December quarter, rising one per cent as people spent more on health services, hotels, cafes and restaurants, and recreation and culture.
But trade was a drag on economic growth, as exports of rural goods and travel services fell, along with an expected drop in private infrastructure spending as mining investment continues to wind down.
Plank said the recent strength in household spending is unlikely to be repeated, given that wage growth is yet to pick up substantially and debt remains high.
“Households appear to share this concern – views towards future financial conditions have fallen from their peak in January and are approaching their long-term average,” he said.
Despite this, Plank said confidence remains elevated compared to levels seen through most of last year.
“We think this points to some resilience in consumer spending going forward.”
Retail spending grew 0.1 per cent in January, according to the latest data from the Australian Bureau of Statistics.
Year-on-year turnover growth slowed to 2.09 per cent, following a 2.97 per cent rise last month.
Despite a turnaround from the 0.5 per cent month-on-month decline recorded in December, the January figures were below market expectations of a 0.3 – 0.4 per cent rebound.
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