Australia Westpac Consumer Sentiment Index marked a decrease of -2.4% mom to 82.4 in April. This downturn extends the index’s streak below the neutral threshold of 100 to nearly two years, underscoring a prolonged period of consumer pessimism.
Westpac’s analysis attributes the lack of recovery in consumer sentiment primarily to the ongoing inflationary pressures that have gripped Australia. Over the past three years, consumer prices have risen significantly, outpacing wage growth by six percentage points. This inflationary trend, coupled with the notable rise in interest rates and increased tax burdens, has significantly strained household incomes, subjecting them to prolonged financial duress.
As attention turns to RBA’s next meeting in May, Westpac anticipates no change to the official cash rate. This forecast hinges significantly on the upcoming March quarter CPI update, due on April 24, which is expected to play a crucial role in shaping the RBA’s stance.
Australia NAB business confidence rises to 1, cost pressures show slight relief
Australia NAB Business Confidence rose from 0 to 1 in March. Business Conditions fell from 10 to 9. Trading Conditions and employment conditions held steady at 15 and 6 respectively. But profitability conditions decline notably from 10 to 6.
Alan Oster, NAB’s Chief Economist, pointed out the unusual situation where business conditions have been “a little above average” and confidence “a little below average” for an extended period. This, according to Oster, reflects a cautious outlook among firms regarding the future, even as the economy shows signs of resilience.
Further details from the report indicate a softening in cost pressures. Labor cost growth decelerated to 1.6% on quarterly equivalent basis, down from 2.0%. Purchase cost growth slowed to 1.4% from 1.8%. Additionally, there was a moderation in product price growth to 0.7% from 1.2%, with retail price growth slightly reducing to 1.3% from 1.4%. Despite these easing pressures, cost concerns remain high, with retail price growth still elevated.
Oster interprets these figures as being aligned with expectations that the journey towards inflation normalization will be “gradual”. Q1 PI result later in April is expected to further reinforced this view.
Full Australia NAB business survey release here.