Consumer sentiment is back on the ascent, according to the latest Roy Morgan research. The broad-based nature of it is encouraging as we enter the peak Christmas trading period. Our composite growth indicator – which wraps together consumer and business sentiment – continues to signal strong growth.
The ANZ-Roy Morgan Consumer Confidence Index lifted from 121.8 in November to 126.5 in December, taking sentiment well off the 14-month low recorded last month. The readings are encouraging on several levels.
- Headline sentiment sits well above the long-term average of 118.8; we’re happy little campers heading into holiday season.
- ANZ-Roy Morgan Consumer Confidence is up as we hit the peak in Christmas trading; it can be the make-or-break period for retailers.
- Both the Current Conditions Index (a concurrent indicator of spending trends) and the Future Conditions Index lifted. This exemplifies the broad-based nature of the results.
- The improvement is not being driven by seasonality; our seasonally adjusted estimates were up too.
- The details are likewise encouraging with lifts in all five sub-categories. Households still feel better off financially compared to a year ago (+4 to +9). It’s still considered a great time to buy a major household item; +43 is pretty euphoric. The three forward-looking indicators (expectations regarding the economy in 1 and 5 years’ time, and wealth a year out) moved in a positive direction.
It’s easy to identify candidates as to why confidence is on the way back up.
House prices are firming again. A pre-election lull has been replaced by a post-election bounce.
Mortgage rates have fallen.
Petrol prices have come down, delivering an effective pay rise.
Employment prospects remain strong.
Inflation is low, and in some pockets deflation rules. Price competition in retailing is aggressive and power resides with the consumer.
Roy Morgan researchers commented: “Our Composite Confidence gauge (which combines sentiment from both businesses and consumers) remains incredibly buoyant. We eye both consumer and business sentiment because together they represent both the buyer and selling side of the equation. Four percent plus growth is signalled. That looks exaggerated to us but we’ll go with the spirit. There appears no stopping this locomotive despite some cracks in the likes of dairying.”