ANZ-Roy Morgan consumer confidence rises as COVID-19 case numbers fall

Consumer confidence is up 4.1 points to 92.7 points (112.7 is the monthly average since 1990) according to an ANZ-Roy Morgan survey released today. It is one of the highest increases in the last three months and is represented by a 4.6% weekly change. Pleasingly, the increase in sentiment was broad-based with all sub-indices gaining.

An increasing number of Australians are more optimistic about current and future financial conditions. Additionally, there is an expectation of improved economic conditions over the next 12 months despite a significant amount of Australians still expecting bad times.

Furthermore, 37% of Australians think it’s a bad time to buy a major household item compared to 33% of Australians saying it’s a good time to buy.

Impact of consumer confidence on economy

Consumer confidence matters because it’s a solid indicator of how consumers are behaving and likely to behave in the future. Spending is linked to people’s discretionary income and ties in with other economic data including gross domestic product (GDP), inflation, jobs, and interest rates.

Additionally, consumer spending could help boost S&P/ASX200 Index (ASX: XJO) share prices since it could lead to greater profits, especially in discretionary based industries such as retail.

ANZ Head of Australian Economics, David Plank, commented on the results:

In an encouraging development, consumer confidence built on the gain seen in the previous week, with the strongest weekly gain for some time. The substantial decline in active cases in Melbourne and continued low numbers in Sydney have raised hopes that the pandemic can be contained without a broadening of lockdowns beyond those already in place. Although only one subcomponent is above the neutral level of 100, the gains made in the last two weeks have bought other subcomponents closer to that point, though ‘current economic conditions’ is still 38% below the neutral level. Confidence was up firmly across all states except Victoria and NSW, where the gains were more subdued. Sentiment is now above neutral in Perth and Adelaide.

Foolish takeaway

An improvement in consumer confidence is better than no improvement. However, it’s still considerably lower than the monthly average since 1990. Government stimulus is still making its way through the economy which could be assisting with the boost in consumer sentiment. 

Additionally, lower coronavirus case numbers could be an important factor as to why an increasing number of Australians are optimistic about their current and future outlook. 

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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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