Aussie consumer confidence slumps amid rising petrol prices
Consumer confidence slumped to its lowest since 1992 in June, falling 5.6%m/m (JPMorgan +1.0%) after rising 2.7% in May,
when confidence improved for the first time this year.
The decline in confidence in June was surprising. We had expected that consumers would be more upbeat in the wake of the
RBA's decision to leave rates steady earlier in the month, coupled with the flow on effects of the May Budget where
generous personal income tax cuts were announced.
The Westpac-Melbourne Institute's consumer sentiment index fell to 84.7 in June from 89.8, and is now 32% lower than its
May 2007 peak. The index reading remains well below the 100 level where the number of optimists equals pessimists.
Sentiment fell across all categories of the index, excluding sentiment toward buying major household items (+2.3%). The
largest declines were recorded in sentiment toward family finances a year ago (-11.8%) and the economy a year ahead
(-14.5%).
Most survey respondents are more pessimistic, however, owing to persistent global growth concerns, financial market
volatility, and rising petrol prices. In particular, the June confidence survey was taken amid the furious debate over
the extent to which the government can keep a lid on petrol prices. According to the Westpac-Melbourne Institute, only
in September 2005 have we seen a larger percentage fall than that recorded this month that wasn't linked to higher
mortgage rates. The September 2005 fall in confidence was in response to a spike in petrol prices (+12% to A$1.31)
following Hurricane Katrina. Going forward, we expect that elevated petrol prices will continue to weigh on sentiment,
although sentiment may get a temporary lift in July when the personal tax cuts will be delivered.
The details:
• Consumer sentiment fell 5.6%m/m in June, after rising 2.7% in May.
• The consumer sentiment index fell to 84.7 from 89.8, remaining below the 100 level, meaning that pessimists still
outweigh optimists.
ENDS