Consumer confidence has risen to its highest level in 2020 after the national accounts last week revealed the economy had grown for the first time this year.
The weekly ANZ-Roy Morgan consumer confidence index rose by 1.7 per cent over the weekend to mark its second consecutive gain.
Australians were feeling less confident about their ‘current financial conditions’ but had more faith in the current and future state of the economy.
ANZ Head of Australian Economics David Plank said last week’s GDP figures had “buoyed sentiment” by pointing to “an earlier than expected return to pre-COVID levels”.
“The headline consumer confidence is now at its highest level in 2020,” he wrote in a note.
“In fact, this is the first time in 18 months that confidence is higher than it was a year prior.
“We believe that this bodes well for year-end spending.”
The promising result coincided with the release of Commonwealth Bank household credit and debit card spending, which over the fortnight to December 4 was 13 per cent higher than during the same fortnight last year.
The data covers the Black Friday and Cyber Monday online sales, but because it is presented in annual change terms, it removes the distortion caused by the seasonal spike in turnover.
CBA found spending on goods tracked sideways in year-on-year terms over the week, while spending on services increased as restrictions were eased and consumers felt more confident about governments’ control of the virus.
The bank noted a “big lift in card spending on eating and drinking out” across the board; stronger growth in online sales than in-store; and a return to “pre-lockdown growth rates” in South Australia as the state ended its short-lived lockdown.
“Spending momentum ticked up in QLD and Vic in the past fortnight while it tracked sideways in NSW and WA,” CBA said.
“The two largest states of NSW and Vic have seen a tick up in spending in Q4 to date when compared with Q3.
“The ACT, NT and TAS recorded stable growth rates in the past fortnight but the pace of growth also remains stronger than in Q3.”
The spending data comes after Reserve Bank governor Philip Lowe said the economic recovery so far had been stronger than expected.
He told a parliamentary committee last week that the bank no longer expects unemployment to hit 10 per cent and says it’s more likely to peak below 8.
But Dr Lowe and deputy governor Guy Debelle have also repeatedly cautioned the government against withdrawing support too early into the recovery, with the latter last month describing that as one of the key lessons of the global financial crisis.
“At the moment we really are seeing a very strong recovery, but a lot of it may be people wanting to get out and wanting to do stuff that they haven’t been able to do as much this year,” ANZ senior economist Catherine Birch told The New Daily, after the release of job ads data on Monday.
“So in early 2021, we [may] get to a point where we have recovered a lot of what we lost, a lot of the low-hanging fruit has been picked, but it may be more of a challenge for that recovery to continue anywhere near the pace during the initial rebound.”