Higher Rate Expectations Weigh On Confidence

Westpac consumer confidence for August declined 0.4% and remains at depressed levels. Unlike in July, the RBA pause did not boost confidence as financial stress and continued concerns re inflation, rates and the economic outlook weighed on sentiment. Westpac believes that confidence won’t improve materially until it is clearer that the RBA is on hold and they see price pressures ease in their daily lives.

• Consumer confidence actually declined 4.9% between those surveyed before the August RBA meeting and those after. Overall sentiment amongst mortgage holders fell 7.2% m/m, as people still believe rates will rise further with more than two thirds expecting higher rates over the year ahead but still down from almost three quarters last month.
• Near-term assessment of the economy deteriorated 4% but there was an improvement in current finances (+3.4%). Other components were stable.
• The “time to buy a major household item” is up 3.4% since June but remains depressed. The Westpac Card Tracker suggests July retail sales remained weak.
• Unemployment expectations improved 3.1% but are not as optimistic as the start of 2023 but remain below the historical average.
• There is a dichotomy in housing with the time to buy down 5.7% in August and close to lows as prices are rising despite higher rates. House price expectations rose another 1.3% to a new cycle high.

Source: MNI - Market News/Refinitiv