We received two updates on consumer sentiment this morning, and both of them paint a grim picture.
📉 The Westpac–Melbourne Institute Consumer Sentiment Index crashed 12.5% in April to 80.1, the biggest monthly decline since the onset of COVID
📉 The ANZ-Roy Morgan weekly read edged up 2.2pts to 64.5 but is at the fourth-lowest level ever recorded in the indexes’ 53-year history.
Other lowlights include:
📉 WBC-MI Family finances vs a year ago is at 66.8 (down 16.7%)
📉 WBC-MI time to buy a major household item is at 83.3 (down 15.0%)
📉 WBC-MI unemployment expectations is at 147.8 (up 9.7% and the highest since August 2020)
📉 ANZ-Roy Morgan inflation expectations are at 7.0% (the highest since series began in 2010).
The twin shocks of rapidly rising fuel costs and interest rate increases are hitting consumers hard. The damage was broadly based with 90 of the 100-odd Westpac sub-groups showing sentiment declines. The small bounce in the ANZ weekly likely reflects the flow through of excise cuts and some optimism around the ceasefire announcement, but we are coming off a record low so the numbers remain historically terrible.
The unemployment expectations read is a key one to watch. Job loss fears are at a 5-year high and rising fast, especially in construction and hospitality. This is a big departure from the 2022–24 cost-of-living grind, where labour market confidence largely held firm.
The last time sentiment was this weak, aggregate spending was being propped up by high migration. That isn’t happening this time, which means the real growth we have seen in household spending over the last couple of quarters is at serious risk. If this crisis continues to drag on there is a real risk that bruised consumer confidence flows through to spending and the economy tips into recession.