Consumer Confidence Rises Above Pre-COVID Levels
When it comes to consumer confidence and shifts in sentiments, the Melbourne Institute and Westpac Bank Consumer Sentiment Index for Australia rose for 12 consecutive weeks. As a result, it achieved 6.3% growth month-on-month to reach 93.7 points in June 2020. That was after a 16.4% surge in May. Prior to the outbreak of the coronavirus pandemic, the Index recorded 95.5 points in January 2020 (up 2.1 points from December 2019). Then in February 2020, it dipped slightly to 91.9 points. That was followed by a significant fall in March 2020 (75.6 points) when the news of the coronavirus first broke. It was the biggest fall in the 47-year history of the survey. As a result, it brought the index down to levels last seen during recessions. However, it’s pleasing to report that the index is currently only 2% below the average in the preceding September to February period. The last reporting month consumer confidence achieved parody (100 points) was August 2019.
Furthermore, economic conditions for the next 12 months jumped 8.4% to 77.2 on the prospects of reopening the economy, and conditions for the next 5 years rose 6.4% to an 18-month high of 102.4 as households were confident that the economy will cope with the pandemic. Time to buy a major item increased 10.1% to 106.3, due to easing concerns around health risks and more certainty around income. Also, the ‘finances vs a year ago’ sub-index went up 3.6% to 77.0, supported by the JobKeeper plan as well as temporary relief for mortgage and rental payments. Finances for the next 12 months sub-index advanced 3.3% to a 105.3.
How The Index Works
The Westpac Consumer Sentiment Index measures the change in the level of consumer confidence in economic activity. On the index, a level above 100.0 indicates optimism; below indicates pessimism. The data is compiled from a survey of about 1,200 consumers. It asks respondents to rate the relative level of past and future economic conditions. A higher than expected reading should be taken as positive/bullish for the AUD. Meanwhile, a lower than expected reading should be taken as negative/bearish for the AUD.