Consumer sentiment recovery resumes
- Westpac Consumer Sentiment Index up 2.2% to 92.1 in May.
- Index recovers about a third of April’s tariff-related fall.
- Solid rebound in views on finances led by sharemarket rally, lower fuel prices.
- Benign inflation shores up consumer expectations for interest rate cuts
"The Westpac–Melbourne Institute Consumer Sentiment Index rose 2.2% to 92.1 in May from 90.1 in April.”
“Consumer sentiment has recovered just over a third of last month’s tariff-related fall, buoyed by a rebound in financial markets and a clear-cut Federal election result. The 2.2% rise in the Index month-to-month understates the extent of the improvement. Recall that our April survey was in the field over the week that included the ‘reciprocal tariffs’ announced by US President Trump. Sentiment was markedly weaker amongst those surveyed after the announcement with an average index read of just 86.6. Against this benchmark, the May read of 90.1 is more like a 6% rebound. That said, the Index is still 3.9% below its March level and in ‘firmly pessimistic’ territory overall.”
“Four of the five components improved in the month of May but all remain below their levels in March. The ‘family finances vs a year ago’ sub-index recorded the biggest improvement, rising 7% to 75.1, retracing three quarters of the sharp 8.5% fall in April. The move mirrors the rebound in global share markets – the S&P/ASX200 up 7.4% between the April and May surveys, having fallen 10% over the previous two months. These swings continue to have more marked impacts on sub-groups higher market exposure, including through superannuation holdings – assessments surged 23% for those aged over 65 and 14% for those aged 55-64.”
“There also looks have been some support from the lower cost of petrol, which can be a big expenditure item for some sub-groups. Since our April survey, average pump prices have declined 13ยข to $1.54/litre nationally. This likely accounts for some of the strong improvement in finance assessments amongst renters (+8.2%) and those aged 18–24 (+7.2%).”
“The Westpac–Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, fell 7.5% to 90.8, returning to the levels seen through February–March. The benign March quarter CPI update released on April 30 would have gone some way towards shoring up expectations.”
“Consumers gained a little more confidence around jobs. The Westpac–Melbourne Institute Unemployment Expectations Index declined 2.1% to 121.3 in May (recall that lower index reads mean more consumers expect unemployment to fall over the year ahead). The Index remains well below the long run average read of 129.”
“On housing, consumers were less pessimistic on assessments of ‘time to buy’ and more positive on the price outlook.”
The Westpac–Melbourne Institute Consumer Sentiment Index for May 2025 was released at 11 am (AEDT), on Tuesday 13 May 2025. The index for June 2025 will be released at 11 am (AEDT), on Tuesday 10 June 2025.
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.