Will Omicron derail our economic recovery?
There's no doubt that we're going through a difficult time, with Omicron creating self-imposed lockdowns around Australia.
We were supposed to be out of lockdown but the spread of CoronaVirus, the high daily numbers of new cases and self-imposed isolation, mixed in with a lack of rapid antigen tests have not only hurt the supply of goods to supermarkets and business in general but has quelled confidence and demand.
However, according to the NAB, despite consumer confidence experiencing a small fall, Omicron is unlikely to derail the economic recovery.
According to NAB, consumer sentiment fell 2.0% month on month /min January to 102.2 from 104.3 but remains above its long-run average:
The fall is much less than the 17.7% decline seen at the height of the pandemic and is also smaller than the falls seen in NSW and Victoria during the lockdowns last year.
NAB believes that this suggests Omicron is unlikely to derail the recovery, and while a hit to Q1 activity is expected, a sharp recovery is likely thereafter.
Unemployment expectations in the survey also support this forecast, and while increasing 8.2%, are still around the lowest seen levels since 2011.
Interestingly the decline in sentiment was led by states which had a relatively low Covid case counts with WA (-5.1% m/m), QLD (-2.7% m/m) and SA (-3.9%), with increases in NSW (+1.7%) and VIC (+4.1%) despite surging case numbers.
This may point to some apprehensiveness around living with COVID as states eased, or plan to ease, interstate border restrictions.
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- ‘economic conditions next 5 years’ fell 6.1% m/m and
- ‘economic conditions next 12 months’ was down 9.6% m/m.
Both are well down on the highs seen in April ahead of recent lockdowns, but importantly remain slightly above historical averages.
The family finances components were mixed results, with ‘family finances compared to a year ago’ up 7.5% m/m while ‘family finance the next 12 months’ fell 2.8% m/m .
It is possible households see themselves with a healthy balance sheet given unprecedented savings accumulated during the pandemic, alongside record high employment.
Spending sentiment improved despite Omicron fears with the ‘time to buy a major household item’ index up 2.8% m/m, suggesting consumers are willing to spend despite surging case numbers.
What about property?
The ‘time to buy a dwelling’ rose 6.3%.
However, home price expectations fell 4.8% m/m to its lowest level since November 2020.
The decline in expectations comes as 55% of respondents expect mortgage interest rates to rise over the next 12 months.
Interestingly, consumers that own investment property have a considerably more pessimistic outlook on house prices than owner occupiers.