| Actual | Previous | |
|---|---|---|
| Index Level | 81.3 | 79.2 |
Highlights
Australia's Westpac-Melbourne Institute index of consumer sentiment rose to 81.3 in July, after inching up to 79.2 in June from 79.0 in May, as the latest CPI data showed the annual inflation rate eased to 5.6 percent in May from 6.8 percent in April.
The Reserve Bank of Australia left its policy interest rate unchanged at 4.10 percent at its latest meeting on July 4 after raising the rate by 25 basis points on June 6. The index at 81.3 is well below 85.8 seen in April, when the central bank stood pat on rates, which helped boost consumer confidence because it was the first pause during its tightening cycle that began in May 2022.
Most respondents believed the RBA's July decision was a temporary pause and that interest rates would move higher over the next year.
Consumers are slightly more hawkish on the interest rate outlook than they were during the RBA's previous pause, Westpac Group chief economist Bill Evans said.
"In summary, the responses suggest consumers are still clearly very nervous about the outlook for interest rates, particularly with the previous pause in April having been a 'false dawn,'" he said in the July survey report."The key message is that sentiment is probably not going to stage a sustained lift from current deeply pessimistic levels until inflation is much lower and interest rates are firmly on hold."
The Reserve Bank of Australia left its policy interest rate unchanged at 4.10 percent at its latest meeting on July 4 after raising the rate by 25 basis points on June 6. The index at 81.3 is well below 85.8 seen in April, when the central bank stood pat on rates, which helped boost consumer confidence because it was the first pause during its tightening cycle that began in May 2022.
Most respondents believed the RBA's July decision was a temporary pause and that interest rates would move higher over the next year.
Consumers are slightly more hawkish on the interest rate outlook than they were during the RBA's previous pause, Westpac Group chief economist Bill Evans said.
"In summary, the responses suggest consumers are still clearly very nervous about the outlook for interest rates, particularly with the previous pause in April having been a 'false dawn,'" he said in the July survey report."The key message is that sentiment is probably not going to stage a sustained lift from current deeply pessimistic levels until inflation is much lower and interest rates are firmly on hold."
Definition
The Westpac-Melbourne Institute Index of Consumer Sentiment is based on a survey of 1,200 consumers on their assessment of short-term and long-term prospective economic conditions and their own financial circumstances. The survey is conducted early each month, usually just before and just after the Reserve Bank of Australia's monthly policy meeting.
Description
The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is on whether economic growth is too strong and leads to inflation.
Consumer spending is the largest part of economic activity, so markets always closely follow consumer behaviour and sentiment. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.
Consumer spending is the largest part of economic activity, so markets always closely follow consumer behaviour and sentiment. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.
