I watch changes in consumer sentiment carefully because when consumers feel financially comfortable and wealthy they spend more and this helps the economy move on.
And when consumers feel less confident they put their hands in their pockets and don't make big financial decisions and in general spend less and in some ways this is a self-fulfilling prophecy and economic conditions get worse
Consumer sentiment fell 0.9% month on month in April to 95.8 from 96.6 according to the latest Westpac-Melbourne Institute survey.
It is now at the lowest level since September 2020 and following last month’s sharp -4.2% fall.
It seems concerned about inflation are rising for both consumers and businesses according to the National Australia Bank
Their ‘time to buy a major household item’ sub-index fell sharply by 5.3% with inflation concerns likely weighing on the minds of potential buyers.
Views on economic conditions though were more positive with the ‘economy, next 12 months’ up 5.8%, and the ‘economy, next 5 years’ up 1.0%, both seeing a partial rebound from falls in the March survey.
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The NAB have suggested that today’s consumer sentiment is starting to impact plans around buying durables, though they say is unclear the extent to which households will pare back purchases when faced with higher prices.
Durables consumption in Australia is running around 24% above pre-pandemic levels and so some correction back towards pre-pandemic levels is likely at some point as consumers pivot towards services.
There was a 3.5% fall in the ‘house price expectations’ series, while ‘time to buy a dwelling’ remained at its lowest levels since February 2008.
Affordability constraints are likely starting to bite alongside the rise in fixed rates and house prices have started to moderate slightly in Sydney and Melbourne.
Fixed interest rates have been pushed up by all the banks and are now at their highest level since June 2019.