Consumers Remain Depressed, Fewer Expect Further Tightening

Westpac’s measure of consumer confidence fell 1.3% in January to 81.0, but is still in the depressed range it has been in since May last year. Inflation and rate pressures continue to weigh on households’ finances but RBA tightening expectations have eased from last month. There are also increased concerns regarding the medium-term economic outlook. Markets don’t expect any further rate hikes and expect the first full cut by Q3 but Q4 CPI on January 31 remains key to the February RBA decision.

• Westpac notes that the January read of 81.0 was not only in the lowest 7% of responses since the survey began in the mid-1970s but was the lowest January since the early 1990s recession.
• 52% of respondents in January expect another rate hike in the next 12 months down from 60% in December. The move was probably driven by lower CPI inflation reads, which have received a lot of press coverage.
• Unemployment expectations rose 1.4% at 137, still below the series average.
• The “time to buy a major household item” was steady.
• “Time to buya dwelling” fell 3.1% and remains weak which is not surprising given the house price series rose 0.5% in January and is 51.5% higher on the year signalling a considerable deterioration in affordability.
• See Westpac’s report here.