Positive but cautious start to the New Year.
Consumer sentiment rose in January, its highest level since 2013, but with mixed concerns when it comes to family finances, according to the latest Westpac Melbourne Institute and ANZ-Roy Morgan surveys.
The Westpac Melbourne Institute Index showed a 1.8% rise to 105.1 in January with Westpac senior economist, Matthew Hassan (pictured), commenting, “Sentiment has continued to recover from the weakness seen in the September quarter last year, bolstered by a less threatening outlook for interest rates and improving confidence around the economy and jobs.” He said while the mood is ‘cautiously optimistic’ rather than buoyant, this is the best monthly index read since late 2013 and the most positive start to a calendar year since 2010.
The index pointed to some recovery in spending following a disturbing slump in the third quarter, a view broadly consistent with recent more positive updates on retail sales and vehicle purchases.
“However, the degree to which spending improves still looks likely to be constrained with the survey detail suggesting family finances are still under pressure, limited scope for further reductions in saving to support spending, and high debt levels an ongoing concern for many households,” Hassan said.
“Views around family finances were mixed. The ‘finances vs a year ago’ sub-index remained weak, declining 1.1%, retracing some of last month’s solid gain, indicating more consumers are seeing their finances deteriorate than improve. The forward view was more positive, with the ‘finances, next 12 months’ sub-index rising 1.7%, its highest level in over four years. ‘The ‘time to buy a major household item’ sub-index posted a slight 0.5% gain but remains well below its long run average.
Consumer views around housing showed mixed results with buyer sentiment improving but price expectations pared back. ‘The ‘time to buy a dwelling’ index rose 6.1%, the most positive reading since September last year with the strongest gains in Victoria and Western Australia while buyer sentiment remained steady but at much weaker levels in NSW. Price expectations declined 4.4% bringing the index broadly in line with its long run average. “The biggest declines in January were in Victoria and Queensland but NSW consumers continue to have the most subdued price outlook after sharp falls in previous months,” Hassan said.
An ANZ-Roy Morgan Australian Consumer Confidence survey also showed an uptrend with the headline index climbing 1.2% in January, its highest reading since October 2013. Details were mixed, however, with views around future financial and economic conditions providing a slight drag on the headline number.
Views around future financial conditions eased slightly while sentiment around current economic conditions rose 1.4%, bringing the index to its highest value since March 2013. Views around future conditions dipped 0.5% following a 4.2% increase previously.
The ‘time to buy a household item’ improved a solid 3.4% lifting the index well above its long term average as the weekly inflation expectations number bounced to 4.7%.
ANZ head of Australian Economics, David Plank, said the rise in consumer confidence is encouraging and consistent with the positive data out on building approvals and retail sales.
“The improvement in overall economic conditions since September supports our view of solid economic activity in 2018. Last week, we noted a positive seasonal bias to the first reading of the year but there is no clear seasonal bias in the second week, suggesting that the improvement in confidence this year may be more than just an empty resolution.
“In our view, persistently low wage growth has acted to constrain rising confidence for some time. As such, we see the February wage data as vital to how consumer confidence plays out over the coming months. In the near term, the employment numbers, out later this week, may also have an impact,” Plank said.