The final piece in the optimistic economist’s puzzle on the Aussie economy fell into place yesterday but I won’t start crowing yet. Let’s wait until January, maybe February, but this spike in consumer confidence to a four-year high has got me, as Big Kev would’ve said “excited!”
At the beginning of this year, we were still worried about:
• The part-time nature of employment — now that’s the opposite;
• The unemployment rate — that’s changed;
• The negative outlook for non-mining investment, that’s changed;
• The likelihood that wages will rise sooner rather than later — that’s changing;
• Consumer confidence — that could be changing.
In case you missed it, the Westpac/Melbourne Institute survey of consumer sentiment rose by 3.6% in December – a 4 year high - after falling by 1.7% in November. The index now stands at 103.3 (long-term average 101.5).
A reading above 100 denotes that optimists outnumber pessimists. In recent months, as the stock market turned more positive to beat the 6000 level for the first time since the GFC on the S&P/ASX 200 Index, local economic growth went from 1.9% to 2.8%.
Furthermore, the unemployment rate dropped to 5.4% after being 5.9% in February and jobs growth was the best on record for 23 years. And significantly, the consumer confidence number gave me reasons for additional optimism. Let’s look at a chart to see if a trend is emerging, which gives us good reason to believe Aussie consumers are joining the economic party that seems to be warming up for 2018.
Even sight-challenged Freddy could see consumer confidence has started heading in the right direction since August. And those three bad months of May June and July probably explain why consumption in the September quarter went down, as ‘bill shock’ on energy prices spooked Aussie shoppers.
Throw in last week’s better-than-expected retail figures where sales were up to a five-month high of 0.5% in October, after being a weak 0.1% in September, and you can see why I’m feeling the Big Kev excitement factor.
But wait there’s more. All five components of the measure increased, unemployment expectations fell further and the “time to buy a dwelling” index rose, as first home buyers undoubtedly reacted to a cooling in house prices.
And I liked the measure of the “estimate of family finances”, which is now up 5.9% on a year ago. The actual consumer confidence index of 103.3 is a lot higher than the long-term average for the index of 101.5!
This is a great end to 2017 and definitely makes me Big Kev excited for 2018!
P.S. For those who don’t know, Big Kev McQuay was a local entrepreneur who sold laundry detergent on TV, whose company did so well, for a time, that it eventually listed. You’ve got to see one of his old commercials — to see the big guy in action. Unfortunately, he passed away in 2005 but died a legend.
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