The Westpac-Melbourne Institute Consumer Sentiment index for May has just been released and it’s not good news for the economy.
The Index fell nearly 7 points to 92.9 from last month’s 99.7, indicating sentiment well below the 100 average line. That’s way off the highs that greeted the Abbott Government’s election last September. Indeed Westpac said this is the lowest level of consumer confidence since August 2011, before the RBA began its easing cycle.
Delayed a week, so the survey could take into account of the impact of the budget, the index shows consumers might just be pulling down the shutters, which puts plans for economic recovery and transition at risk at a time when commodity prices are falling.
Clearly consumers are worried about their economic future. Those who think their financial situation will be better in 12 months crashed with Westpac noting,
The sub-index tracking expectations for ‘family
finances over the next 12 months” slumped 23% to its lowest reading on record
Equally attitudes toward the recently bright housing markets have taken a tumble with the question of “‘whether now is a good time to buy a dwelling’ fell by 6% and is now at its lowest level since November 2010, when the Reserve Bank had been lifting interest rates, and 25% off its highs of September last year” according to Westpac.
This post-budget fall in both Westpac’s Sentiment indicator and ANZ’s, released yesterday, is a worrying sign given economic data since March was on the more positive side.
The number highlights the market’s move to price out any rate hikes over the next 18 months now looks like it’s on the money.
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