Consumer confidence perks up to best level in five months

Consumer confidence surged to its highest level in five months, buoyed by a period of stability in the Middle East and a decline in fuel prices. The ANZ-Roy Morgan Consumer Confidence Index increased eight points in July to 99.3, just below the 100 benchmark that signifies a shift from pessimism to optimism. However, ANZ chief economist Sharon Zollner cautioned that the situation in the Middle East and fuel prices continue to impact sentiment.

The survey responses collected later in the month, following renewed hostilities, indicated a slight drop in consumer confidence. Yet, a growing number of households - 16 percent - reported being financially worse off compared to a year ago, while 10 percent anticipated being better off in the same period, marking the strongest figure since the beginning of the year.

Consumers were less pessimistic about the economic outlook within the next year and more hopeful about the economy's strength over the next five years. There were also indications that consumers might be less apprehensive about making major purchases. The proportion of households considering it a poor time to buy large household items decreased to 7 percent from 11 percent.

Retailers now face the challenge of determining whether the uncertainty will cause consumers to lose interest or lead to a lasting decline in spending, beyond the financial impact of higher fuel prices. Inflation expectations for the next couple of years remained steady at 4.6 percent, slightly below the June year's headline rate of 4.1 percent, with a gradual decline towards the Reserve Bank's 2 percent target by the second half of next year.

House prices were expected to rise by 2.6 percent in the coming year, slightly lower than the June estimate.