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Very Depressed Consumer Sentiment, Watch Household Data Closely


Despite anecdotes and other consumer series, there was a lot of concerning information in Westpac’s November consumer confidence survey. The index fell 6.9% to 78.0 and -25.9% y/y, as news for consumers and their finances was almost all negative over the month (family finances -11.2% m/m). It is still above the low at the start of the pandemic but is now worse than the depths during the global financial crisis.

  • This survey justifies the RBA’s more cautious approach. The details are concerning but other consumer information still points to robust spending and an element of consumers saying one thing and doing another. As such, spending developments warrant close attention.
  • Households did not respond well to the October budget and 35% said that it worsened their financial outlook for the next year, above the 30% historical average. The projected 56% increase in energy prices over the next two years and limited cost-of-living relief spooked households.
  • Confidence before the RBA announcement on November 1 was steady at 83.1 but fell to 75.6 post the meeting. This reaction was in response to the RBA being clear that hikes will continue as almost 60% surveyed expect rates to rise 1pp over the next year up from 54%.
  • 40% of those surveyed said that they would spend less on Christmas this year compared with last. This was not only above the 33% average but also a series high (begins 2009).
  • Prices also weighed on sentiment, as petrol price rose 6% last week, Q3 CPI was elevated, the RBA revised inflation higher and flood-related food price rises were widely reported.
  • House price expectations fell 8% m/m to a new cyclical low but still above the pandemic and 2018/19 troughs. Responses were a lot lower after last week’s RBA hike falling 13.6%.
Westpac consumer confidence vs family finances a year ahead

Source: MNI - Market News/Westpac

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