Matthew Hassan, Research Analyst at Westpac, notes that the Australia’s Westpac Melbourne Institute Index of Consumer Sentiment rose 0.3% to 102.1 in June from 101.8 in May.
“The consumer mood has shown a clear improvement in 2018, the first half of the year marking the best run of sentiment reads since 2014. That said, the Index has not built on the gains seen at the start of the year and remains well below the levels typically associated with a robust consumer. While there has been a clear lift in confidence around the economy, this has had a muted impact on views around family finances, which remain downbeat.”
“The June survey detail suggests the sentiment mix may be starting to shift with a better read on family finances, albeit offset by a less upbeat assessment of the economy.”
“Consumers are a little less optimistic about the economy. The ‘economic outlook, next 12 months’ sub-index fell 2.8%, retracing most of last month’s 3.4% rise, and the ‘economic outlook, next 5yrs’ sub-index declined 3.1%. Despite the declines, both sub-indexes remain comfortably above long run average levels.”
“The Reserve Bank Board next meets on July 3. The Bank will again leave rates unchanged. While the improved tone to sentiment compared to last year is welcome, the mix is still not pointing to a sustained lift in consumer demand with views on family finances still downbeat and a clear ‘risk averse’ tone to other survey responses. That will be mildly disappointing for the RBA with their forecast for above trend growth this year and next resting in part on a lift in consumption growth.”
“Westpac continues to expect the cash rate will remain on hold throughout 2018 and 2019.”
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