However, it is still below the neutral level of 100.
This is despite the weak wage growth and rising inflation and could mean another big rate hike from the Reserve Bank in September in an effort to slow down the overheated economy.
“Consumer confidence rose for a second straight week as it gained 1.7 per cent. The unemployment rate dropping to 3.4 per cent in July might have helped boost sentiment, though the news on wages, especially in real terms, was disappointing,” said ANZ head of Australian economics David Plank.
“Consistent with this, confidence is still exceptionally low; but consumers are modestly optimistic about their future financial situation despite the prospect of further increases in interest rates.
“Across the major states, confidence improved in NSW, Victoria, Queensland and SA, while it fell in WA ‒ although confidence is higher in WA than any other state. The increase in overall sentiment was mainly driven by a second consecutive jump in the subindex that captures ‘current economic conditions’. Confidence in the near-term economic outlook remains exceptionally weak, however.”
In the subindices, “Weekly inflation expectations” dropped 0.3ppt to 5.5 per cent, while the four-week moving average decreased 0.1ppt to 5.6 per cent.
Four of the five subindices improved. “Current financial conditions” fell 3 per cent after a 5.4 per cent rise the week before. “Future financial conditions” rose 1.4 per cent.
Meanwhile, “Current economic conditions” jumped 8.4 per cent, to its highest level since the of end May. “Future economic conditions” were practically unchanged with an increase of 0.1 per cent.
“Time to buy a major household item” rose 2.4 per cent after three straight weeks of decline.
The Reserve Bank of Australia pointed to household spending as a source of “uncertainty” ahead of its September decision, noting that consumer confidence was generally falling but household incomes were also benefiting from the tight labour market.
Aggressive policy tightening since May has also likely had a hand in the first decline in business activity in the private sector since the COVID-19 omicron variant wreaked havoc in January.
The services economy – fell to a seven-month low of 49.6 in August from 50.9 in July, according to the preliminary S&P Global Australia Purchasing Managers’ Index.
A reading below 50 points to a contraction in activity, according to CommSec senior economist Ryan Felsman.
The manufacturing indicator also dropped to a 12-month low of 54.5 in August from 55.7 in July.
Businesses from the services sector responding to the survey blamed inflated costs of energy, fuel and labour for the weak results. Ongoing supply chain disruptions also played a role.
Job creation in the services sector also declined in August due to worker shortages and a spike in resignations.
With the RBA tipped to keep hiking rates, S&P Global economists said this “bodes ill” for the wider economy that’s showing signs of underlying weakness.
“Certainly, the weaker run of recent economic data suggests that the steam is coming out of the Aussie economy as rising interest rates and skyrocketing inflation bite,” Mr Felsman said.
