Consumer sentiment sinks back towards lows
- Westpac Consumer Sentiment Index down 2.4% to 82.4.
- Sentiment slump hits two-year mark, showing few signs of lifting.
- ‘Time to buy major item’ index falls back to extreme lows.
- Slightly firmer read on finances but expectations for economy slipping.
- Improving unemployment expectations a notable bright spot.
“The Westpac Melbourne Institute Consumer Sentiment Index declined 2.4% to 82.4 in April, from 84.4 in March.”
“The pessimism that has dominated the consumer mood for nearly two years now is still showing few signs of lifting. The latest Index read is well below the ‘neutral’ level of 100, meaning pessimists outnumber optimists by over 15ppts. It is also in line with the average recorded over the last 24 months, marking an extended period of bleak sentiment reads by historical standards. Indeed, outside of the deep recession of the early 1990s, this is easily the second most protracted period of deep consumer pessimism since we began surveying in the mid-1970s, with all other sentiment slumps lasting nine months or less.”
“The April sentiment update suggests consumers continue to expect progress on inflation and associated cost-of-living pressures to be slow... Consumers remain unconvinced about prospective interest rate cuts. The Westpac-Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, showed a marginal rise in April, up 1.5% to 122.8, a slightly more hawkish rate outlook. Just over 40% of consumers are still bracing for rate increases, while 24% expect no change, 21% expect declines and 15% reported “don’t know”.”
“The component indexes show a slight improvement in assessments of family finances but a loss of confidence in the economic outlook and an unsettling fall in buyer sentiment.”
“The most unsettling detail in April was a sharp deterioration in buyer sentiment. The ‘time to buy a major item’ sub-index dropped 6.6% to 78.7. This component has captured the full impact of sharply rising prices on consumers’ purchasing power. The average read of 82.1 over the last two years is extremely weak for a sub-index with an average historical read of 125. The April deterioration may be a sign of a renewed lift in price pressures.”
“Australia’s labour market remains a notable bright spot for Australian consumers. The Westpac-Melbourne Institute Unemployment Expectations Index declined 2.7% to 124.6, below the long run average of 129 and the marking the best result since May last year (recall that lower index reads mean more consumers expect unemployment to fall over the year ahead). Incomes may be under pressure but consumers are relatively secure about their job prospects.”
“Housing-related sentiment was broadly unchanged, buyer sentiment slipping back and price expectations holding around optimistic levels… “The ‘time to buy a dwelling’ index declined 3.2% to 75.3 in April, retreating from a fifteen-month high, albeit one that was still in deeply pessimistic territory… The Westpac Melbourne Institute Index of House Price Expectations was again essentially unchanged, nudging up 0.1% to 161.2. Just under 70% of consumers expect housing prices to continue rising in the year ahead.”
The Westpac–Melbourne Institute Consumer Sentiment Index for April 2024 was released at 11am (AEDT), Tuesday 9 April 2024. The index for May 2024 will be released at 11am (AEDT), Tuesday 21 May 2024.
The Westpac–Melbourne Institute Survey of Consumer Sentiment Index measures changes in the level of consumer confidence in economic activity. Further information can be found here.