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Despite an increase of 3.5 per cent in the week ending 9 March, consumer confidence was down 2.2 per cent for the month, according to the ANZ-Roy Morgan Australian Consumer Confidence Index.
While the level of confidence remains higher than in much of 2011-2012, a continuation of the recent downward trend would raise some questions about the sustainability of the recent pick up in household consumption growth, according to a statement by Roy-Morgan.
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The confidence sub-index that is most correlated with household consumption – ‘better off financially compared to a year ago’ – fell over the month and while it remains higher than levels seen in recent years, this sub-index has not shown any significant improvement over the past six months.
ANZ’s head of Australian economics, corporate and commercial, Justin Fabo said confidence is now sitting around its long-term average but has been trending down in past months.
“Interestingly, our weekly data revealed that consumer confidence fell quite sharply a few weeks ago, likely to be in response to adverse media around the job losses in the manufacturing and aviation sectors. Last week, however, Consumer Confidence retraced part of this previous weakness, which could suggest that the fall is temporary. Even still, Consumer Confidence has been trending down for some months now,” he said.
Despite the downward trend in confidence Mr Fabo said the broader economy appears to be performing well, driven in part by a strengthening property market and a lower Australian dollar.
“More broadly, the Australian economic outlook is looking quite positive. House prices continue to pick up strongly, and building approvals have risen sharply. Prospects for the recovery in the non-mining business sector are improving”.
“Business surveys now show a tentative bounce in conditions and confidence after the weakness in early-to-mid 2013. While the lower AUD should continue to help with the rebalancing of growth drivers in the economy, a key uncertainty for the outlook is the timing of the pick-up in non-mining business investment,” he said.
