Daily Commentary BY THE CURVE TEAM –

Confidence Fades as Outlook Deteriorates

11th of August

Confidence amongst consumers continues to fade as the outlook deteriorates.

The latest weekly consumer sentiment pulse posted its seventh consecutive decline. After bouncing back from the deep low set back in late March as restrictions were ramped up to combat the virus, confidence has slowly been fading.

Confidence in the economy over the near term has proved to be the biggest drag on confidence since the onset of the pandemic. This has been closely followed by consumer’s perceptions of their own finances compared to a year ago. While the latter has been steadily improving, confidence in the economy, especially over the short term remains particularly weak.

Longer run confidence in the economy held up fairly well as the general narrative was that Covid-19 and its associated impacts would be short lived and life will resume as normal rather quickly. As the virus fight and its impact have proved less transitory than first though, its lingering impacts are weighing on longer term confidence.

Consumer confidence in the long run prospects for the economy has fallen over the past few weeks. As has their confidence in their own finances over the year ahead. These are important as they are likely to have a greater impact on long term decision making, thus having a greater impact on the long run outlook.

We take a deeper look into this and the outlook in the latest Curve Monthly Insights due out later today. We take a deep dive into the latest update from the RBA and what it means for not only the economy but funding markets, deposit spreads and deposit rates.

David Flanagan

Director - Interest Rate Markets