Australia: Consumer sentiment plunges to near two-year low on worse short-term expectations at the outset of Q3
July 10, 2019
The Westpac-Melbourne Institute consumer sentiment index dived to a 23-month low of 96.5 in July from 100.7 in June. Therefore, it moved below the 100-point mark that separates optimism from pessimism among consumers.
July’s slump came on the back of a sizable drop in consumers’ expectations on the general economic situation in the year ahead—which fell to the lowest level in four years—, as well as of gloomier expectations on their finances in the same time span. Households also turned pessimistic regarding the general economic situation in the next five years, and they expected the unemployment rate to rise further going ahead. Subdued GDP growth in Q1, and weak retail sales and an uptick in the unemployment rate in April-May were most likely behind consumers’ deteriorated expectations. That said, consumers’ spending attitudes improved, probably as a result of the Reserve Bank’s loosening cycle and the government’s tax cuts: house prices expectations; the willingness to buy a dwelling; and the willingness to buy a major household item all improved in July. Moreover, households had better assessments of their family finance compared to a year ago.