Daily Commentary BY THE CURVE TEAM –

Consumer Confidence Creeping Higher

12th of May, 2020

As the peak of the Covid-19 new case numbers passes by, so does peak pessimism for consumers.

Consumer confidence collapsed a few weeks ago as Covid-19 was spreading quickly and containment measures started ramping up. As uncertainty was skyrocketing, consumers quickly retreated and confidence in family finances and the economy retreating at a record pace.

The latest weekly survey showed that consumer confidence continues to slowly improve as the threat from the virus in Australia dissipates. After bottoming in late March, the weekly index has slowly been recovering, albeit still pointing to a fairly pessimistic consumer.

Perceptions of family finances over the year ahead have been recovering. Expectations around the performance of the economy over the near and medium term have also improved. There is still some apprehension around the long run prospects for the economy and consumers remain unenthused about their current finances compared to a year ago.

On Wednesday we get the broader monthly sentiment survey. The weekly index suggests that we should see a small improvement. However, pessimists are still expected to comfortably outweigh optimists. It is likely that consumer confidence will remain on the softer side until we see the economy open up and return to what might be considered normal.

What behavioural changes we see once we get the economy reopened will be the big challenge for the RBA. We take a look at the RBA’s forecasts and the challenges they face along with what has been happening with the outlook for interest rates in our latest Monthly Insights due out later today.

David Flanagan

Director - Interest Rate Markets