Inflation expectations jump as households turn more pessimistic about the year ahead
Consumer confidence dropped by 3.7 points last week to 73.4, while the four-week moving average edged down 0.9 points to 77.
Weekly inflation expectations rose by 0.8 percentage point to 6.1 per cent. The four-week moving average increased by 0.3 percentage point to 5.5 per cent.
According to the latest ANZ-Roy Morgan Australian Consumer Confidence, measures of household finances also weakened. The “current financial conditions” subindex (over the past year) slipped 1.2 points, and “future financial conditions” (next 12 months) fell 6.6 points.
Economic sentiment was mixed across time horizons. “Short-term economic confidence” (next 12 months) declined 6.4 points, while “medium-term economic confidence” (next five years) lifted 0.4 points.
The “time to buy a major household item” subindex fell 4.5 points, a sign of softer willingness to make large purchases.
“Consumer confidence declined 3.7 points last week, taking the series to its weakest level since July 2023,” said Madeline Dunk (pictured right), economist at ANZ. “Most subindices declined, with the sharpest fall seen in households’ confidence about their financial conditions over the coming year. That subindex remains at its lowest level on record.
“Rising geopolitical uncertainty is likely to have played a role. Since the conflict in the Middle East escalated last week, WTI oil futures are up roughly 30%, and inflation expectations recorded their largest weekly rise since we began measuring the series in 2010.
“This takes inflation expectations to its highest level since November 2022. RBA governor Bullock noted last week that the Board will be watching inflation expectations closely to ensure they remain anchored.”
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