According to the latest weekly Consumer Confidence Index statement by research house Roy Morgan, the bump up – which comes off the back of the previous week’s 2.1 per cent bounce – was attributed to “a sharp rise in the ‘time to buy a household item’ sub-index”.
“The ‘time to buy a household item’ sub-index posted a sharp 5.2 per cent rise last week, ending a streak of weekly declines,” the statement said.
Perceptions about current financial conditions improved by 0.5 per cent over the last week, while perceptions on current economic conditions fell by 2.1 per cent.
Consumer views on future financial conditions rose incrementally by 0.2 per cent and future economic conditions increased by 0.7 per cent.
ANZ head of economics David Plank described the latest statistics as “encouraging” given that four of five sub-indices had risen.
“We were concerned that news of a mortgage rate increase by one of the major banks might be a big blow to sentiment, but consumers appear to be taking it in their stride for the moment at least.
“We have previously highlighted the weakness in the ‘time to buy a household item’ sub-index over the last two months. A sharp increase in the sub-index last week is, therefore, quite timely,” Mr Plank said.
He identified a number of headwinds in the form of slow wage growth, dropping house prices and high debt levels, but said “there [were] certainly some offsets”.
“Income tax cuts, the new Childcare Subsidy and falls in certain utility prices should all help consumers’ wallets, providing some more resilience to the outlook for consumption this year.”
Household consumption outpaces household income: NAB
An economic update note from NAB Group Economics released on Tuesday also noted the “reasonable outcome” of household consumption in the second quarter of 2018 despite weak wages growth.
“Household consumption growth recorded another reasonable outcome in the face of constrained income growth,” the note said.
“At around 3 per cent in year-ended terms, consumption continues to track at a moderate rate but continues to outpace the growth in household income.
“The result in the quarter saw the savings rate fall further, reaching its lowest level since 2007.
“Consumption has tracked slightly above our expectations, but given the persistence of headwinds facing households, we expect growth to slow slightly from here, without the pick-up in wages the RBA is looking for.”
The NAB note also observed that consumer spending was being supported by an increase in hours worked and people employed, not wages growth.
Consumption is forecasted to average around 2.5 per cent in the years to come, according to the note.
