The much anticipated Westpac-Melbourne Institute Consumer sentiment for July has just been released showing that confidence rose 1.9% in July to 94.9.
That seems okay, but Westpac chief economist Bill Evans said in a note accompanying the release that:
This is another disappointing result for the Index. We had expected a stronger bounce back in the Index following its 7% tumble in the aftermath of the Commonwealth Budget in May.
The Index is now only 2% above that recent low in May. It is also 14% below the recent high in November 2013 and 10% below the average print in 2013.
This lack of bounce is consistent with what we are seeing each week from the ANZ weekly consumer confidence data, which means any recovery is going to be protracted.
But Evans said that there were some encouraging signs in the sub-components of the survey:
Views around family finances improved. The sub-index tracking assessments of ‘family finances relative to a year ago’ improved by 1.9%. The sub-index on the ‘one year outlook for finances’ posted an even stronger 12.3% rise although that still did not compensate for the record low reading post Budget for that component which plunged 23% in May.
So the good news is that things have stabilised and the outlook has improved.
One big hurdle is that consumers aren’t confident about their job prospects which is one key component to the necessary recovery in sentiment and the retail sector after last month’s 0.5% fall in retail sales.
But for all the risks and uncertainty, Evans ends on a confident economic note:
In this note we have indicated an expectation that confidence will recover through 2014 as anxieties around the Budget ease. In time, those trends, along with a gradually improving global economy will lay the foundation for higher rates later in 2015. Westpac expects rates to remain on hold for the next year or so prior to a first hike in August next year.
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