Daily Commentary BY THE CURVE TEAM –

Consumer Confidence Hit By Slowdown In Economy

14th of March, 2019

As flagged by the weekly ANZ survey on Tuesday consumer sentiment took a dive following recent GDP figures, placing additional pressure on the RBA’s outlook.

Westpac’s consumer sentiment survey saw consumer confidence fall 4.8% in March from 103.8 to 98.8, dipping back into ‘cautiously pessimistic’ territory. The figure records the lowest level since September 2017 and was primarily driven by growing concerns over the economic outlook.

While sentiment remained resilient in February as mortgagees welcomed the higher chance of a rate cut, weak December quarter GDP figures and the focus on a ‘per capita recession’ by several media outlets has eroded this optimism as consumers become more aware of the economy’s state.

This was particularly evident with responses over the duration of the survey week showing “a marked drop-off after the national accounts update”  and the ‘economic outlook, next 12 months’ sub-index recording a 6.9% fall.

What is perhaps more concerning is that risk aversion levels amongst consumers is now more than it was at the height of the GFC. As consumers shift to a more cautions position and begin saving more, household spending is likely to decrease and place further pressure on the RBA’s growth forecasts.

Another source of pressure on RBA forecasts could be the rising job concerns amongst consumers. With the ‘Unemployment Expectations’ index surging to an 18-month high, worry over job security could impact consumption decisions and dampen household spending.

Moving offshore, the Brexit mess continued overnight. British MPs have now voted to prevent the UK from leaving the EU without a deal but at the same time are not willing to accept the deal the EU previously agreed to. Uncertainty remains as a vote in the coming days will decide whether they request an extension to the deadline.

Neyavan Suthaharan

Client Services Officer