Second RBA rate cut dampens consumer confidence: ANZ-Roy Morgan

Consumer confidence fell over the weekend, an ANZ survey has suggested.

It appears there is a view the latest cut to the cash rate by the Reserve Bank of Australia was a signal of worsening economic conditions.

The ANZ-Roy Morgan Australian Consumer Confidence index dipped 1.1% from the previous week, with respondents' perception of the economy - including the outlook for the next 12 months - retreating 3.6% and prospects about conditions in the next five years sliding 1.7%.

But the weekly measure of sentiment showed a 3.7% rise in how people felt about their financial condition compared to a year ago.

It was based on about 1,000 face-to-face interviews conducted on Saturdays and Sunday.

Consumer sentiment is still above the average of 114.4 points held since 2014 and the longer term average of 113.1 points since 1990. 

But three out of the five major components of the index fell last week:

• The estimate of family finances compared with a year ago was up from +9.0 points to +13.0 points; 
• The estimate of family finances over the next year was up from +25.5 points to +27.1 points;
• Economic conditions over the next 12 months was down from +7.2 points to +3.3 points;
• Economic conditions over the next 5 years was down from +12.8 points to +10.9 points; 
• The measure of whether it was a good time to buy a major household item was down from +40.3 points to +33.8 points. 

The measure of inflation expectations rose from 3.7% to 3.9%.

NAB's latest business survey also suggested that the business sector has lost significant momentum over the past year with the recent run of results also suggesting that the economy is unlikely to record a significant pickup in growth in Q2.

According to the survey, the weakening in momentum has been broad-based across the business sector over the past year, with all industries having weakened.

Retail also continues to show ongoing malaise, with reported business conditions at a level last seen in the GFC - while manufacturing has also shown steep declines.

Alan Oster, NAB Groups Chief Economist said, “business confidence appears to have unwound its spike in May, which we think was driven by a short-term election bounce and increased optimism around a renewed interest rate easing cycle by the RBA."

“While business conditions increased slightly in the month, they remain well below average after trending lower for over a year now. The decrease in conditions has been relatively broad-based across states and industries – suggesting that there has been sector wide loss of momentum over the past year."

“Forward looking indicators suggest that there is unlikely to be a material improvement in conditions over the next few months with forward orders remaining very weak. This suggests the pipeline of demand is weak and is consistent with below average confidence,” Mr Oster concluded.

Sentiment also fell in Westpac's Consumer Sentiment Survey.