As inflation drops, confidence falls

• After a strong showing in the previous reading, consumer confidence fell by 1.6% last week. All the subindices were in the negative, except the ‘time to buy a major household item’. Confidence remains well above average.

• ‘Current financial conditions’ was down 2.7%, while ‘future financial conditions’ fell 1.5% after four straight weekly gains, including a 5.2% rise in the previous reading.

• ‘Current economic conditions’ was down substantially, falling 5.5%, while ‘future economic conditions’ fell 2.6% after a healthy gain of 7.7% in the previous reading.

• The ‘time to buy a household item’ jumped by 4%. The rise was pleasing, as it is the only subindex that is below its long-term average. The weekly reading for ‘inflation expectations’, which can be volatile, fell to 3.8%.

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ANZ Head of Australian Economics, David Plank, commented:

“Confidence took a fall last week after the lower CPI data. The weekly reading on inflation expectations fell to 3.8%, though the four-week moving average ticked up to 4.1%, as a low result from five weeks ago dropped out. Inflation expectations have been trending lower since late last year and have been below 4% three times in the last five readings, which is unprecedented in the

history of the ANZ-Roy Morgan survey. We think this highlights the challenge facing the RBA.”

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