Consumer sentiment slump hits two-year mark
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The news: The slump in consumer sentiment is the second most protracted period of deep consumer pessimism since Westpac began surveying it in the mid-1970s due to inflation continuing to challenge the economy.
The numbers: The Westpac Melbourne Institute Consumer Sentiment Index declined 2.4% to 82.4 in April. A ‘neutral’ level is a reading of 100, meaning in April pessimists outnumbered optimistic by over 15 percentage points.
This slump has hit the two-year mark and makes it an extended period of bleak sentiment reads by historical standards — second only to the deep recession of the early 1990s.
Confidence in the economic outlook slipped during the month, led by a further drop in medium to longer-term expectations. The ‘economy, next five years’ sub-index fell 4.4% to 89.8 and the ‘economy in the next 12 months‘ sub-index declined 2.7% to 82.7 — having fallen 7.1% in two months.
The ‘time to buy a dwelling’ index also fell 3.2% to 75.3 in April, retreating from a 15-month high.
However, the most promising result was family finance expectations for the next 12 months, which was up 1.8% to 95.5 — a 13.6% rally from the lows seen in the middle of last year — thanks to expected tax cuts in July.
The context: Westpac senior economist Matthew Hassan said the poor sentiment was a result of consumer price rises that had outstripped wage growth by 6 percentage points over the last three years along with sharp increases in interest rates and a big lift in tax payments.
What they said: “The whole episode has also been relatively drawn-out as well — inflation still running above the RBA’s 2% to 3% target band three years on and giving little to no scope for either monetary or fiscal policy to provide material support,” Hassan said.
The source: Westpac Consumer Sentiment Index
