The headline bounce is worth treating cautiously given the timing, since the survey window closed on July 9, just before oil prices spiked again on the latest round of Middle East hostilities, meaning the improvement in sentiment is already somewhat stale by the time it is published. The far larger jump in the future family finances measure compared to the modest move in five year economic expectations suggests households were responding mainly to the temporary petrol price relief rather than any broader improvement in confidence about the economy. With the RBA having already delivered three hikes this year to 4.35%, and roughly six in ten respondents still expecting further mortgage rate increases, the underlying mood remains fragile heading into a period where fuel costs are rising again rather than falling.
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Confidence recovered just in time to miss the next oil shock.
Summary:
- The Westpac-Melbourne Institute consumer sentiment index rose 4.1% in July to 83.9, following a 2.9% fall in June, though the reading remains in the bottom 10% of results over the survey’s 50 year history
- Westpac said sentiment stayed highly sensitive to developments abroad, with daily responses weakening noticeably as the situation in the Strait of Hormuz deteriorated over the course of the survey week
- The survey ran from July 6 to July 9 and closed before the latest spike in global oil prices
- The measure of future family finances jumped 13.4% in July as petrol prices eased, while expectations for the economy over the next five years rose a more modest 0.7% to 87.1
- The measure of whether it is a good time to buy a major household item added just 0.5% to 86.8, well below its long run average of 123.0
- The Reserve Bank of Australia has raised rates three times this year to 4.35%, and around 60% of those surveyed expect mortgage rates to rise further over the next 12 months, down from 66% in June
Australian consumer confidence rebounded in early July, but the improvement looks fragile given the survey closed just before oil prices spiked again amid renewed Middle East hostilities. The Westpac-Melbourne Institute index of consumer sentiment rose 4.1% from June, when it had fallen 2.9%, to a reading of 83.9, a level that still places it in the bottom 10% of results over the survey’s 50 year history, according to Westpac.
Westpac’s head of Australian macro forecasting said sentiment remains highly sensitive to events abroad, noting that daily responses through the survey week showed a clear weakening as the situation in the Strait of Hormuz deteriorated. The survey itself ran from July 6 to July 9, meaning it closed before the latest jump in global oil prices, leaving the improvement captured in the data already somewhat dated by the time it was published.
The gains were driven largely by temporary relief at the petrol pump rather than any broader shift in economic outlook. The measure of future family finances jumped 13.4% in July as fuel prices eased, but expectations for the economy over the next five years rose only 0.7% to 87.1, and the measure of whether it is a good time to buy a major household item added just 0.5% to 86.8, still far below its long run average of 123.0. The gap between the sharp improvement in near term household finances and the far more muted shift in longer term sentiment underscores how directly tied the bounce was to fuel costs specifically.
The broader mood also remains weighed down by the Reserve Bank of Australia’s tightening this year, with three rate hikes taking the cash rate to 4.35% and squeezing mortgage holders. Around 60% of those surveyed still expect mortgage rates to rise further over the next 12 months, though that share has eased from 66% in June. With fuel prices already climbing again as regional tensions escalate, the conditions that supported July’s rebound look unlikely to persist into the next reading.
This article was written by fl6553e4b45d84486a91658a8b3f02bf22 at investinglive.com.
