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Sentiment takes a tumble

30 November -0001 Steven Cross

There may still be some scope for the Reserve Bank to cut rates next month after the Westpac-Melbourne Institute Index found consumer sentiment took a tumble in March.

 

The Index of Consumer Sentiment fell from 110.5 in March to 104.9 in April.

Westpac's chief economist Bill Evans said the result was surprising given that the previous two months had shown solid growth in confidence.

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“The index had risen by 9.9 per cent over the previous two months and it appeared that, finally, after the Reserve Bank had been cutting interest rates for more than 12 months that the rate cuts and a more settled world economy were gaining real traction with consumers,” he said.

“While it was reasonable to expect the recent momentum in the index over the last two months to have slowed in April, a 5.1 per cent fall was not expected.

“This result emphasises how fragile consumer confidence has become in the current environment. In fact, the index is now only 1.5 per cent above its level in November 2011, following the Reserve Bank's first cut in this easing cycle and only 0.6 per cent above the print from last November.

“When rate cuts took hold in the previous two cycles the index surged by 37 per cent (2009) and 18 per cent (2002). The recent increase of 9.9 per cent, now marked down to 4.3 per cent, looks much less convincing.”

Mr Evans said the drop in confidence could be best attributed to global concerns and an associated correction in the share market.

Sentiment takes a tumble
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