February RBA Hike & Tone Drives Slump In Consumer Confidence

ANZ-Roy Morgan consumer confidence fell 5.5pts in the week ending February 12, its sharpest fall since the June 2022 RBA meeting, bringing the 4-week average to its lowest this year after the RBA hiked rates again and indicated that there was more to come. It is the lowest sentiment reading since early April 2020. Spending has been holding up a lot better than consumer confidence surveys have suggested but after 325bp of tightening in less than a year, savings being depleted and a large number of mortgage refis due that may be about to change.

• Inflation expectations in the survey rose 0.1pp to 5.5% leaving the 4-week average stable at 5.4%. It is struggling to break below 5% and has been above this rate since late 2021, possibly signalling a stickiness in price expectations. MI consumer inflation expectations are published on Thursday and with petrol prices up over the last two weeks, it could print higher again.
• The drop in confidence of mortgage holders was more pronounced than other groups of households. It’s now at its lowest since April 2020.
• 4 of the 5 components in the ANZ survey fell with only “future economic conditions” rising suggesting that consumers see the current cost of living issues as temporary. “Current financial conditions” fell 4.9 pts to close to its record low of late March 2020. “Time to buy a major household item” fell 11 points.