SMEs, particularly those in the retail sector, will be hoping the rise in consumer confidence translates to spending on the High St – this hasn’t happened yet
Australians are slightly less concerned about the global economy, but there’s not much indication they’re going to spend more.
Consumer confidence rose 0.2% in the week ending 7 February, breaking a four-week decline, according to the latest ANZ-Roy Morgan consumer confidence index.
While turmoil on global financial markets have weakened consumer confidence recently, ANZ co-head of Australian economics Felicity Emmett says the poll result suggests concerns have abated somewhat.
‘As a small, open economy, Australia remains vulnerable to the fortunes of the global economy,’ she said on Tuesday. ‘The domestic economy, however, is currently not in bad shape, with the unemployment rate improving significantly over recent months.
‘A solid rise of one% in the ANZ measure of job ads in January suggests the near-term employment outlook remains positive, which should play some part in supporting consumer confidence.’
However, she said the real question would be whether rising confidence translates into stronger spending this year, as predicted by the Reserve Bank of Australia.
‘Last week’s December retail numbers were disappointing and suggest that household consumption growth remains moderate at best,’ Ms Emmett said. ‘Further improvements in the labour market and confidence are likely to be required to drive a stronger recovery in consumer spending.’
Business confidence has held up reasonably well in the face of global financial turmoil, but uncertainty could threaten the non-mining sector’s recovery.
The National Australia Bank’s index of business confidence has remained unchanged at plus two points in January, implying businesses with favourable outlooks outnumber those with a negative view.
NAB’s chief economist Alan Oster says fairly good domestic fundamentals are helping to offset what could potentially be a big drag on confidence from international markets. But the longer the volatility continues, the bigger the risk that it will flow through to Australia’s non-mining sector, NAB said.
Conditions have fallen notably from the highs of 2015, driven by a tumble in Western Australia and South Australia as the impact of the mining slowdown spreads.
‘Business conditions in mining have deteriorated to an eye-watering minus 47 points, which is having a clear flow-on effect to conditions in the major mining states,’ Mr Oster said.
Conditions are patchy outside the resources industry, with the falling Australian dollar taking a toll on wholesale, while retail is also weak. In contrast, the transport sector has been boosted by lower oil prices, while the services industries remain the clear outperformers, the survey found.
‘This outcome suggests fundamental conditions in the non-mining economy remain very resilient,’ Mr Oster said.
AAP
