by Craig James

Weekly Consumer Confidence; Reserve Bank Governor Speech

Consumer confidence rebounds: The ANZ-Roy Morgan Consumer Confidence Rating rose by 4.4 per cent to a 13-week high of 113.5 in the week to July 20. Since 1973, the average confidence reading in July has been 106.2.

Reserve Bank Governor Speech: The Reserve Bank Governor, Glenn Stevens, has delivered a speech entitled “Challenges for Economic Policy”. At the outset, the Governor noted: “I wish to be clear at the outset that my remarks today are about global issues, and contain no particular message specific to Australia.”

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

What does it all mean?

Slowly but surely Aussie consumers are pushing concerns about the Federal Budget behind them and getting on with life. Consumer sentiment is back to the levels that existed three months ago – before Budget concerns started to dampen Aussie spirits. Clearly the rebound in confidence is great news for retailers but also gives the Reserve Bank food for thought in terms of future interest rate settings.

The Reserve Bank Governor has decided to turn down an opportunity to talk on the Australian economy, preferring to focus on the global challenge on lifting economic growth rates. On the outlook for global growth, Stevens said “I would argue for realism, as opposed to either naïve optimism or determined pessimism.” He added further “…unless we think the tendency for human optimism has been completely drummed out of us, animal spirits in the ‘real economy’ will surely improve at some point.” The comments tend to support the view that the Governor is a “glass half-full” person rather than someone who sees things as a “glass half-empty”.

The Reserve Bank Governor’s speech can be found here.

What do the figures show?

Consumer Confidence rating

The ANZ/Roy Morgan index of consumer confidence rose by 4.4 per cent to 113.5 points in the week to July 20. The index is now above the 2014 average of 110.1.

All of the five components of the index rose in the latest week:

  • The estimate of family finances compared with a year ago was up from -2 to +3;
  • The estimate of family finances over the next year was up from +13 to +21;
  • Economic conditions over the next 12 months was up from -7 to -1;
  • Economic conditions over the next 5 years was up from +7 to +10;
  • The measure on whether it was a good time to buy a major household item was up from +33 to +35.

Why is the data important?

A weekly survey on consumer sentiment is undertaken by Roy Morgan Research in conjunction with ANZ. The Roy Morgan survey can trace its roots to 1973. The survey is important as a guide to consumer spending. More than 1,000 interviews are conducted each week to compile the overall results.

What are the implications?

The consumer sentiment index has now risen strongly for the second straight week, despite news on MH17 and the Gaza Crisis dominating over the survey period. After a 3.4 per cent gain in the week to July 13, the confidence index has lifted a further 4.4 per cent.

Interest rates are low, sentiment levels are back to “normal”, the Aussie dollar is still hovering near US94 cents and home prices are still rising, supporting the “wealth effect.” Overall the environment has become more positive for retailers and other consumer-dependent businesses.