1 Sep 2023

Consumer confidence remains deeply pessimistic

1:56 pm on 1 September 2023
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Consumer confidence remains deeply pessimistic, despite a surprise improvement in sentiment about buying major household items.

The ANZ-Roy Morgan consumer confidence index rose 1 point in August to 85 -- a reading below 100 indicated pessimism.

Sentiment was little changed, with a quarter feeling worse off financially, and a third expecting tougher economic times over the coming year.

A net 31 percent felt it was a bad time to buy a big ticket item, such as major household appliances, compared to 39 percent in July.

ANZ chief economist Sharon Zollner said the improvement was surprising.

"That is surprising because mortgage rates are still very high and so is inflation, but house prices have stopped falling, so maybe that's making people with mortgages feel a little bit better about the world," she said.

Household inflation expectations for the next two years were largely unchanged at 4.6 percent.

Zollner said that was worth paying attention to as consumers had a good track record of predicting inflation.

Consumer inflation expectations were often influenced by petrol prices, which have recently risen, she said.

"I think it's good news that inflation expectations didn't jump further.

"Now, consumers don't get to set prices but they are a part of wage negotiations, so given the labour market is still tight, their expectations do matter."

Zollner said consumers deserved "kudos for being the best inflation forecasters" as they predicted the spike in inflation "earlier than anyone else".

The survey also saw house price inflation expectations lift again, from 1.9 percent to 2.4 percent.