The ANZ-Roy Morgan Consumer Confidence dropped nearly six points to 90.7 as inflation was reported higher than expected and interest rate rises became a reality.
Rising inflation also contributed to the rapid drop in confidence which is now at its lowest since Victoria’s second wave of COVID-19 in August 2020 and is 22pts below the same week a year ago, 1/2 May 2021 (112.7).
A look at Consumer Confidence by housing status is revealing with the measure down almost 10pts amongst those ‘paying off their home’. In contrast, the fall was of a smaller magnitude for those who own their own home (down 4.6pts) and for those who are renting (down 3.8pts).
A look at the different states shows the fall was not uniform around the nation with large falls in NSW, Queensland and South Australia only partly offset by increases in Victoria and Western Australia.
The index showed that just a quarter of Australians, 24 per cent (down 1ppt) say their families are ‘better off’ financially than this time last year compared with 37 per cent (up 4ppts) that say their families are ‘worse off’ financially.
Looking forward, 31 per cent (down 2ppts) of Australians expect their family to be ‘better off’ financially this time next year (the lowest figure for this indicator for over two years since April 2020) compared with 27 per cent (up 4ppts) that expect to be ‘worse off’ financially (the highest figure for this indicator for over two years since April 2020).
Now only 10 per cent (down 3ppts) of Australians expect ‘good times’ for the Australian economy over the next 12 months, compared with 30 per cent (up 5 ppts) that expect ‘bad times’.
In the longer term, just 15 per cent (unchanged) of Australians are expecting ‘good times’ for the economy over the next five years compared with 18 per cent (down 1ppt) expecting ‘bad times’.
The prospect of interest rates increasing has led to buying intentions deteriorating this week, with 28 per cent (down 4ppts) of Australians saying now is a ‘good time to buy’ major household items (the lowest figure for this indicator for over two years since April 2020), while 42 per cent (up 6ppts) say now is a ‘bad time to buy’.
ANZ head of Australian economics, David Plank, said the strong inflation result was likely the primary driver of the drop in confidence.
“This is supported by the fact confidence dropped 9.6 per cent amongst people ‘paying off their home loan’, while for people who already own their home or are renting confidence dropped by 4.7 per cent and 4.2 per cent, respectively,” he said.
“Inflation expectations increased 0.2ppt to 5.3 per cent last week as average petrol prices rose nationally. This is the lowest level for consumer confidence at the start of a tightening cycle since the inflation targeting regime began in the early 1990s. This may see the RBA tighten more slowly than the market is pricing.”
With consumer confidence dropping it was not surprising that the NAB Online Retail Sales Index also contracted for a second consecutive month in March.
However, in year-on-year terms, the index continued to grow, albeit slowing in March.
Fashion was the only category to record growth in month-on-month terms in March. The largest contraction in monthly growth was recorded by the largest category, homewares and appliances, at a rate over double that of the total index. Media, and grocery and liquor also recorded a contraction beyond the overall. In year-on-year terms, takeaway food, department stores, and games and toys lead.
All states recorded a contraction in growth in month-on-month terms in March, with SA, WA, and Victoria fairing slightly better than the overall. Tasmania and NSW were particularly weak, with ACT and Queensland not far behind, albeit the latter slightly better than the month prior.
The contraction in growth was worse for regional areas in the month and most of the contraction in growth was recorded by domestic retailers, with the contraction in international improving relative to February.
NAB estimates that in the 12 months to March, Australians spent $55.24 billion on online retail, a level that is around 14.8 per cent of the total retail trade estimate (February 2022, Series 8501, Australian Bureau of Statistics), and about 16.6 per cent higher than the 12 months to March 2021.
NAB chief economist Alan Oster said growth over the past two years has been particularly volatile, with the standard deviation more than double when compared with the first eight years of the series.
“Looking through this monthly volatility, using the year-on-year and 12-months-to measures, online sales continue to grow,” he said.
“It is likely that, with the easing of instore restrictions in most states in February, instore sales were again boosted in March, while online contracted. This result is consistent with what has been observed in the UK (BRC) and the US (Census Bureau).”
