Consumer confidence at 8-month lows

Consumer confidence

• Consumer confidence: The weekly ANZ/Roy Morgan consumer confidence rating fell by 2.3 per cent in the week to April 5 to a reading of 109.7 – an 8-month low and below the average level since 2014 of 111.4.

What does it all mean?

• According to the latest data, Aussie consumers turned gloomy over the past week. There is no major explanation for the change. Data showed that home prices continued to rise. And there weren’t too many reasons for fresh concern about the global economy. But a weaker Aussie dollar may have preyed on consumer minds. While good for businesses, a weaker Aussie can lead to costlier overseas trips, costlier on-line purchases and potentially higher prices for a raft of consumer goods. Still, the Reserve Bank would be pleased, not disappointed, that the Aussie dollar is easing – as it potentially boosts exports and therefore incomes across the economy. The Aussie dollar fell 2.7 per cent last week and consumer confidence fell by 2.3 per cent.

What do the figures show?

Consumer sentiment:

• The ANZ/Roy Morgan consumer confidence rating fell by 2.3 per cent in the week to April 5 to 109.7 – an 8-month low and below the average since 2014 of 111.4.
• Four of the five components of the index fell in the latest week:
• The estimate of family finances compared with a year ago was up from +4 to +5;
• The estimate of family finances over the next year was down from +25 to +22;
• Economic conditions over the next 12 months was down from -5 to -7;
• Economic conditions over the next 5 years was down from +8 to +6;
• The measure on whether it was a good time to buy a major household item was down from +29 to +23.
• 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.
• The Reserve Bank is likely to cut interest rates by another quarter of a percent to 2.00 per cent on May 5.

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?

•  The Reserve Bank is likely to cut interest rates by another quarter of a percent to 2.00 per cent on May 5.