Consumer pessimism continues as inflation fears dominate, with the Westpac Melbourne Institute Consumer Sentiment Index dipping 0.3% to 82.2 in May, down from 82.4 in April.
Renewed cost-of-living pressures and inflation concerns have overshadowed a relatively well-received federal budget.
“Consumer sentiment remains deeply pessimistic,” said Matthew Hassan, Westpac senior economist.
Despite slight improvements in expectations, current conditions have deteriorated further.
The sentiment level and responses to questions about July’s tax cuts indicated continued spending restraint by consumers heading into the second half of the year.
The survey, conducted during budget week, shows an index read of 86.8 pre-budget, up 5.3% from April, and 76.6 post-Budget, down 7% from April.
“That 11.8% deterioration compares to a 7.4% drop last year,” Hassan said, suggesting some disappointment may stem from the challenging economic context highlighted by the budget rather than its content.
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Responses to the impact of the budget on family finances were relatively well-received.
“With the exception of the big stimulus budgets of the COVID period, this is the least negative response we have seen in the last fourteen years,” Hassan said in a media release.
The budget seems to have eased some inflation and rate rise concerns.
The Westpac-Melbourne Institute mortgage rate expectations index jumped 8.3% to 133 in May from 122.8 in April.
“The source of renewed rate rise fears was the higher-than-expected March quarter inflation outcome and more ‘vigilant’ inflation-fighting rhetoric from the RBA governor,” Hassan said.
For more detailed analysis, read the full Westpac-MI Consumer Sentiment May report. To compare with the previous results, click here.
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