Growth in full-time employment drives consumer confidence higher

The most recent ANZ-Roy Morgan Consumer Confidence Index has climbed 2.9 percent to 118.4 points in the week to July 30. The increase was driven by a significant 12.3 percent jump in consumers' views towards current economic conditions.

The latest data marked an increase for the second consecutive week. Driving the rise includes a strong climb in sentiment around future economic conditions.

According to ANZ head of Australian economics David Plank, confidence had made an impressive recovery from its recent low. It reversed most of the decline this year.

Plank said the sharp boost in views around economic conditions is particularly encouraging. He believes that the increase is likely related to solid growth in full-time jobs and fall in the unemployment rate since the year started.

"Going forward, it will be interesting to see if the upswing in confidence translates into higher spending,” he said. ANZ believes that the slow wage growth, sluggish growth in house prices and the high level of household debt are likely to remain a drag.

It expects that the RBA will remain on hold through the rest of the year. It also believes that the risks are now more balanced than previously, given strengthening labour market conditions as well as the steady lift in underlying inflation.

Consumer confidence has reached its highest point since February, on the back of solid full-time jobs growth and a drop in the unemployment rate. Inflation expectations were unchanged on a four-week average basis.

In June, the total number of people with jobs increased by 14,000. Full-time employment rose by 62,000 and part-time jobs dropped by 48,000, according to a report from the Australian Bureau of Statistics in July.

A solid global economic environment and stronger local currency have been supportive, Plank said. "On occasion, there is some correlation between the two (Australian dollar and sentiment), though the relationship is volatile and may reflect the influence of other factors rather than being causal,” the ANZ research reads.

The details were mixed despite the jump in the headline index. While views towards economic conditions is rising sharply, households’ views around current and future financial conditions dropped 1.2 percent and 0.9 percent respectively. The sub-indices remain above or close to their long term averages.

Meanwhile, the time to purchase a major household item rose 0.9 percent last week after a 1.8 percent increase previously. This sub-index remains well above its long term average.

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