Daily Commentary BY THE CURVE TEAM –

Growth Concerns Intensify as Consumer Sentiment Stalls

17th of January, 2019

Domestic data released yesterday will be concerning for the RBA as consumer confidence fall heavily going into the start of the new year.

Westpac’s consumer sentiment survey showed confidence fell 4.7% in January, the biggest monthly drop in over 3 years. The index dropped a just below 100 at 99.6, indicating that pessimists now outnumbered optimists.

Consumer sentiment was impacted by a number of different drivers according to the report. Falling house prices, weaker-than-expected growth figures, and widespread political uncertainty have all contributed to consumers feeling less confident.

With all index components falling over January, one of the more concerning, but not surprising figures was the consumer views on family finances. Soft wage growth and sliding house prices have placed significant pressure on consumers as they become more concerned about their financial security.

Housing market conditions appear to be mixed, at least in the eyes of most Australians. Views on ‘time to buy’ improved but consumers still felt house prices would decline.

One of the brighter spots was that the unemployment expectations index, although increasing by 2.2%, still remained strong at 123.6, suggesting they are still reasonably upbeat about their job security.

The soft consumer sentiment report will no doubt be of significant concern for the RBA, especially considering its’ ‘strongly above trend’ growth forecasts. The recent run of weak data, going back to the Q3 GDP report, will no doubt be reflected in the RBA’s statement when the meet on February 5.

Neyavan Suthaharan

Client Services Officer