Consumer sentiment back near pre-COVID-19 crisis levels: Bill Evans

Consumer sentiment back near pre-COVID-19 crisis levels: Bill Evans
Consumer sentiment back near pre-COVID-19 crisis levels: Bill Evans

EXPERT OBSERVATION

Remarkably, consumer confidence is now back around pre-COVID levels, having recovered all of the extreme 20% drop seen when the pandemic exploded in March–April.

Confidence has clearly been buoyed by Australia’s continued success in bringing the Coronavirus under control, which has in turn allowed for a further easing in social restrictions over the last month.

The Index is now only 2% below the average in the preceding September to February period. Note that sentiment was already on the weak side prior to the COVID shock with the Index through this earlier period showing a persistent excess of pessimists over optimists. With the unemployment rate set to remain elevated; extensive restrictions staying in place and the economy facing permanent structural change it would be surprising if the recent upward momentum continues and is able to sustain a stable level of confidence which is above that previous period.

We have also seen more even confidence levels in the major states as restrictions begin to be eased extensively across the country. Victoria lagged NSW in May with an 8.4% lift compared to 23%. However in June confidence in Victoria has jumped by 11.7% (to 94.9) compared to 4.8% in NSW (95.5). Overall confidence is now at comparable levels across both states.

While the monthly gains are impressive, the Index is still relatively weak by historical standards – in pessimistic territory overall and down 7% on a year ago. The general picture is of continued intense pressure on family finances and concern about the near- term outlook for the economy but with firming optimism around prospects for finances in the year ahead and the economy’s medium term outlook.

The contrast between that medium-term outlook in this recession and the last recession in the early 1990s is important. This component of the Index is around 50% higher than the average over a long four years in that earlier period. Respondents are confident that they can see eventual better times ahead whereas in the early 1990s there was a pervasive mood of despair for years.

Bill Evans is an economic spokesman and researcher at Westpac.

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Consumer Sentiment Bill Evans

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