Record sharemarket lifts consumer spirits

From

Consumer sentiment

  • Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.1 points (1 per cent) to 107.3 – the first lift since early December. Sentiment remains below both the average of 114.2 points held since 2014 and the longer term average of 113.1 points since 1990.

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

What does it all mean?

  • Consumer sentiment readings bounce around from week-to-week. And the survey results will be influenced by a raft of factors – not just strict economic or financial data or events but also indicators like oil prices, political and geopolitical events as well as natural disasters, like bushfires, and acts of terrorism.
  • Aussie consumers haven’t had much to be happy about in recent weeks. But the extraordinary acts of generosity and kindness in response to horrific bushfires would have brightened spirits. It is always hard to know if people are across the latest economic data. But in the past week there was coverage in the media of the record levels for the sharemarket. And property prices continue to rise. Aussie consumers would also reflect on the public and private funds being provided to assist those affected by bushfires and fund recovery and rebuilding.
  • So it makes sense that Aussie consumers were a little more positive in the past week. The economic data was mixed but the spike in retail sales in November was encouraging together with higher job vacancies and dwelling approvals.
  • Most people believe that their finances are in good shape and indeed consumer expectations of personal finances in the next year stands at 2-month highs.
  • The hope is that the sharemarket retains its strength (indeed there were new highs this morning), the predicted rain does indeed fall in NSW and Victoria, the bushfire danger eases and the US-China Phase 1 trade deal is signed on Wednesday.

What do the figures show?

  • The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.1 points (1 per cent) to 107.3 – the first lift since early December. Sentiment remains below both the average of 114.2 points held since 2014 and the longer term average of 113.1 points since 1990.
  • Three of the five major components of the index rose last week:
    • The estimate of family finances compared with a year ago was down from +12.7 points to +6.5 points;
    • The estimate of family finances over the next year was up from +25.3 points to +26.0 points;
    • Economic conditions over the next 12 months was up from -21.3 points to -16.5 points;
    • Economic conditions over the next 5 years was up from -9.4 points to -1.6 points;
    • The measure of whether it was a good time to buy a major household item was down from +23.3 points to +21.9 points.
  • The measure of inflation expectations was down from 3.7 per cent to 3.8 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?

  • The Reserve Bank has a lot to digest. Mixed economic data, bushfires, record US and Australian sharemarkets and the seeming improvement in trade relations between the US and China. Interest rates cuts certainly still remain on the agenda. The next two key events are the December job figures on January 23 and the Consumer Price Index (inflation) on January 29.

 

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