Australian consumer confidence drops to 117 unwinding New Year bounce

In the week ended 22 January 2017, the ANZ-Roy Morgan Australian consumer confidence dropped 1.9 percent to 117.0 after rising strongly in the beginning of the New Year. The drop was widespread with four out of five subindices recorded modest declines. Positively, consumers’ views towards current finances rose 0.7 percent.

Households’ views towards their future finances dropped 3 percent, reversing gains recorded earlier and dropping to its lowest value in five weeks. However, both indicators of finance stay quite well above their long run averages.

Household’s views of economic conditions in the coming 12 months dropped 2 percent after increasing by 11.2 percent in the earlier two weeks. Consumers’ views of economic conditions in the coming five years dropped 2.4 percent following a 2.8 percent increase in the earlier two weeks.

The bounce after Christmas in household views on whether ‘now is a good time to purchase a household item’ has been short-lived, with this sub-index falling 2.5 percent in the week. The four-week moving average in inflation expectations rose higher for the third straight week to 4.4 percent in the last week from 4 percent in mid-December.

ANZ senior economist Jo Masters stated that the reverse in gain seen last week likely reflected the end of the traditional holiday season and probably the decline in domestic stock prices. The ongoing uncertainty regarding the impact of a Trump presidency and Brexit might have affected too. Even so, the headline index stays quite strong, and encouragingly, consumers’ views of overall financial conditions stay quite above the long term trend, impacting a positive outlook for consumer spending.

“Heading into the Q4 inflation report this week, inflation expectations have been trending higher. However, this likely reflects an increase in petrol prices rather than a broad-based increase in inflationary pressures,” added Jo Masters.

At 05:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was neutral at 4.3734, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -46.9547. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex