Australian consumer confidence fell heavily in April with the Westpac-MI consumer sentiment index sliding 4% to 95.1.
The reading, below the 100 level that indicates the number of pessimists outnumber optimists, left the index at the lowest level seen since September 2015 — when Malcolm Turnbull took over as prime minister with a pledge to restore the nation’s confidence.
Underlining the scale of the deterioration seen over the month, it was also the largest monthly percentage decline in the past seven months. It also left the index down 6.4% since November 2015.
According to Westpac, four of the five survey components fell in April.
Sentiment towards family finances compared to a year ago slid 3.8%, outpaced by a 6.6% slump in expectations for the year ahead.
Confidence towards the economic outlook also took a hit with the subindices tracking sentiment looking one and five years ahead falling 5.5% and 5.9% respectively.
The only component to record an increase was whether now was a good time to buy a major household item. It rose by 1.0% having fallen heavily in the prior survey.
Outside of the sentiment components, there was mixed news on the outlook for the labour and housing markets.
According to Westpac, the survey’s unemployment expectations index fell by 1.8% with with big improvements in New South Wales and Victoria partially offset by weakness in the mining states and South Australia.
A decline in the unemployment expectations index indicates that respondents are more confident around the outlook for the unemployment rate.
Though sentiment towards the labour market improved a touch, expectations for the housing market came in mixed.
The survey’s ‘time to buy a dwelling’ index tumbled by 9.2%, led by a substantial 13% decline in sentiment towards the New South wales property market, the largest and most expensive in the country.
While sentiment towards whether now was a good time to buy soured, the survey’s separate house price expectations index rose 5.3% after logging a 9.8% gain in March, leaving it at the highest level seen since September 2015.
Despite the mixed nature of the April report, Bill Evans, chief economist at Westpac, called the result “disappointing”.
“It appears that international and market developments continue to create unease for respondents although the signals are mixed,” says Evans. “The Australian share market fell 3% over the month and media coverage on China continues to highlight risks. On the other hand the US share market rose 2.4%. Specific sentiment towards housing fell sharply.”
He also suggests that recent strength in the Australian dollar — something that in the past helped to boost sentiment levels — may have undermined confidence over the survey period.
“Given that rebalancing of the economy towards service exports –- tourism and education in particular –- has been an important positive development over the last two years, respondents may now be interpreting any increase in the AUD as adverse for future growth,” says Evans.
Though the April result was weak — casting further doubt over the ability of household spending to power Australian economic growth moving forward — Evans believes that it will not be enough to see the RBA cut interest rates in the months ahead.
“Despite this disappointing read on sentiment we expect the Board will keep rates on hold for another month. We retain our call that rates will remain on hold for the remainder of 2016”, he says.