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The weekly ANZ-Roy Morgan Australian Consumer Confidence report showed a drop of 2.2 per cent in the week ending 18 September 2016, unwinding some of the previous week’s gain of 3.3 per cent to 118.1. However, this previous rise in consumer optimism has been attributed to the underlying strength of the Australian economy, as outlined in the Q2 GDP report last week.
The report suggests that the main driver of this fall in confidence was last week’s sell-off in financial markets, raising fears of a sharper correction across bonds and equities.
According to ANZ Research, the weakness in confidence was broadly based. Consumers’ views toward their current and future finances both declined by 1.8 per cent, while householders’ views on whether ‘now is a good time to buy a household item’ dropped by a sharp 4.6 per cent.
Householders’ views of the economic outlook were also weaker, as their confidence in the 12-month economic outlook dipped by 1.1 per cent and their confidence in the five-year economic outlook dropped by 1.4 per cent.
“Consumer confidence dipped 2.2 per cent last week, although it remains high by historical standards," confirmed ANZ head of Australian economics, Felicity Emmett.
"Last week’s sell-off in financial markets — which saw the ASX index suffer heavy losses early in the week — was likely the main driver of the decline in confidence,” she added.
“Equity markets have now rebounded from last week’s lows. As such, we think consumers will likely turn their focus back to domestic fundamentals.”
Ms Emmett concluded that the strength in the housing market, low interest rates, and an improving labour market, should continue to support confidence in the near term.