Australia: Consumer sentiment plunges on budget
May 22, 2013
In May, the index of consumer sentiment published by Westpac and the Melbourne Institute plunged to 97.6 points from 104.9 in April, reaching the lowest level in nine months. In addition, the index fell below the 100-point threshold that separates optimistic from pessimistic territory for the first time since October last year.
According to Westpac and the Melbourne Institute, the result was driven by households' "sharply negative response" to the budget presented on 14 May. A special question around the impact of the budget "indicated that 44% of respondents assessed that the Budget would make them worse off with only 5.4% seeing it as improving their position". This represents the most negative response since a separate budget question was included in the survey in 2010.
All five components of the index fared worse compared to April. In particular, households' expectations for the general economy in the long run (5 years) recorded the strongest drop. Against this backdrop, the sub-index related to the intentions to purchase major household items fell 1.3% over the previous month.
FocusEconomics Consensus Forecast panellists see private consumption growing 2.4% in 2013, which is unchanged from last month's forecast. Panellists see private consumption expanding 3.1% in 2014.
Author: Armando Ciccarelli, Head of Data Solutions