Consumer confidence drops to recessionary levels

The confidence index dropped to 7.6 per cent last week following the decision by the Reserve Bank of Australia to raise the cash rate by 50 bps.

The ANZ Consumer Confidence Index is now at its lowest point since early April 2020 and has not been this low since January 1991 in the middle of the last recession in the 1990s.

The index recorded that “Weekly inflation expectations” decreased 0.1ppt to 5.6 per cent, while its four-week moving average was unchanged at 5.5 per cent.

All subindices fell. “Current financial conditions” dropped 1.0 per cent, while “future financial conditions” fell 10.1 per cent.

“Current economic conditions” declined 7.2 per cent after a 9.4 per cent loss the week before. Future economic conditions were down 4.6 per cent.

“Time to buy a major household item” dropped 14.4 per cent.

“Reflecting the dire state of sentiment, the percentage of respondents who expect ‘good times’ for the economy over the next five years dropped to 10 per cent – its lowest level on record. So far this year household spending has been resilient despite the softness in consumer confidence. The RBA, for one, will be looking closely to see whether this divergence can continue,” said ANZ head of Australian economics, David Plank.