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Australia’s consumer sentiment hits six-month low amid inflation fears
The October index read is now at firmly pessimistic levels, albeit still well above the very weak reads seen during the extended ‘cost-of-living’ crisis, according to Westpac.
Australia’s consumer sentiment fell to a six-month low, with the Westpac–Melbourne Institute Index dropping 3.5 per cent to 92.1 in October.
Inflation concerns and uncertainty over interest rates have dampened optimism, particularly regarding family finances, which fell nearly 10 per cent.
Despite weaker confidence, job security fears remain limited.
“Consumers appear to have been rattled by recent updates on inflation. ‘Partial’ measures released over the last month suggest annual inflation has lifted back towards the top of the RBA’s 2–3 per cent target range,” said Matthew Hassan, head of Australian macro-forecasting at Westpac in an article titled, ‘Westpac-MI Consumer Sentiment Bulletin’.
Although the Reserve Bank of Australia’s (RBA) decision to hold rates steady in September provided some relief, sentiment remained firmly pessimistic.
The weakening was most pronounced in expectations for family finances, with the ‘family finances, next 12 months’ sub-index plunging nearly 10 per cent to 97.1—its lowest in over a year. Current assessments also fell 4.8 per cent to 82.1, suggesting that the boost from previous rate and tax cuts may be fading.
Short-term economic outlook expectations slipped 2.5 per cent to 89.9, while longer-term views edged up 1.4 per cent to 94. Meanwhile, the ‘time to buy a major household item’ sub-index dipped 1.1 per cent to 97.2, reflecting continued caution in consumer spending ahead of the holiday season.
Despite weaker confidence, consumers remain largely unconcerned about job security. The Unemployment Expectations Index dropped 2.9 per cent to 127.6. That takes the index slightly below its long-run average but still broadly consistent with a stable labour market.
“The Reserve Bank Monetary Policy Board (MPB) next meets on November 3–4. With inflation within the target range and monetary policy still a little on the restrictive side, the next rate move can reasonably be expected to be down. However, the MPB remains cautious, especially after the stronger than expected result for the August CPI indicator, and it will be sensitive to the flow of data from here. A cash rate cut in November is far from assured, though neither is it off the table,” added Hassan. “And the longer the MPB delays further cuts, the more likely it is that it will end up cutting by more than it currently envisages.”
Fibre2Fashion News Desk (SG)