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Family finances: best shape in 7 years

Craig James
Wednesday, January 06, 2016

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By Craig James

Consumer confidence: The weekly ANZ/Roy Morgan consumer confidence rating rose by 0.8 per cent to 116.3 in the week to January 3. Confidence is up 4.1 per cent over the year.

The assessment on the state of family finances was at the highest levels in seven years.

Business survey: Dun & Bradstreet’s Business Expectations Index fell 2.9 points to 18.9 points for March quarter 2016.

The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.

What does it all mean?

The Reserve Bank believes that measures of consumer confidence are worth watching – especially those questions dealing with family finances or spending intentions. 

The good news is that people’s perceptions about the state of their finances are very positive at present. No doubt lower petrol prices and low interest rates are contributing to the solid state of family finances and that means good news for retailers.

As we noted yesterday in our regular weekly report, petrol prices at 10-month lows at present, with the average household saving around $17 a month on filling up the car with petrol compared with three months ago.

Given that Aussie consumers believe that their finances are far better than they were a year ago, many believe it is a good time to buy a major household item like a television or refrigerator. The measure of whether it was a good time to buy a major household item is at six-month highs. In other words, an encouraging environment for retailers.

The latest business survey is also encouraging. The one area where the Reserve Bank would like to see more spending is business investment and according to the Dun & Bradstreet survey just over 23 per cent of businesses intend to lift capital spending in the current quarter.

What do the figures show?

Consumer survey 

The weekly ANZ/Roy Morgan consumer confidence rating rose by 0.9 points (0.8 per cent) to 116.3 in the week to January 3. Confidence is up 4.1 per cent over the year and above the average of 111.4 since 2014.

Two of the five components of the index rose in the latest week:

  • The estimate of family finances compared with a year ago was up from +6 to +13;
  • The estimate of family finances over the next year was down from +26 to +24;
  • Economic conditions over the next 12 months was down from 0 to -1;
  • Economic conditions over the next 5 years was down from +10 to +7; and
  • The measure of whether it was a good time to buy a major household item was up from +35 to +39 points – a six-month high.

Business survey

Dun & Bradstreet’s Business Expectations Index, the average of the survey’s measures of Sales, Profits, Employment and Capital Investment, has fallen to 18.9 points for March quarter 2016, down 2.9 points from 21.8 points in the December quarter, and down 5 points from 23.9 points in March quarter 2015. Nonetheless, the business expectations index is significantly higher than the 10-year average of 6.8 points.

Of encouragement was the result on investment. Dun & Bradstreet noted: “the Capital Investment Index rose 0.7 points to 12.6 points, compared to 11.9 points in the December quarter of 2015. Some 23.1 per cent of businesses said they intend to increase spending on Capital Investment in the first quarter of 2016 compared to the fourth quarter of 2015.”

“Despite the general downward trend in expectations, the December survey found that across all sectors, 65.6 per cent of businesses reported feeling more optimistic about growth in 2016 compared to 2015 – up from 64.5 per cent in November.”

What is the importance of the economic data?

The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.

What are the implications for interest rates and investors?

Consumers are generally positive, believing that their finances are stronger than a year ago. The current environment is positive for retailers. Still, consumer-focussed firms need to remain vigilant given the more global nature of retailing.

Business surveys are in general agreement that current conditions are the best in around five years.


Published: Wednesday, January 06, 2016

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