The Westpac-Melbourne Institute Consumer Sentiment report was released on Wednesday and showed that consumer sentiment fell 3.2 per cent in April. Westpac chief economist, Bill Evans, called the result “disappointing” and preferred to have more momentum in consumer sentiment as the Commonwealth Budget is released next month. The index fell from 99.5 to 96.2. Last time this year, the index was at 99.7 but later fell 6.8 per cent after the 2014-15 Budget was released. The report stated that the Budget was a “contributing factor” to soft consumer sentiment for the remainder of 2014. Because the index is now entering the Budget period below the 100-level with downward momentum, the report believes that confidence is “looking vulnerable” in the future months.
Mr. Evans attributed multiple factors to the soft results. The report had previously attributed the 8 per cent jump in the index in February to the sharp fall in petrol prices. Since then, petrol prices have increased from $1.10 per litres in February to $1.34 per litres in April, thereby lowering consumer confidence. Another factor to the decrease in the index has been attributed to the constant coverage of falling iron ore prices. As households notice the decline in the country’s largest export, their confidence has been undermined. One other significant factor to the decrease in the index would be the decision to hold off on a cash rate cut. According to the report, the probability that the Reserve Bank would cut the cash rate was around 75 per cent. Failure to deliver on the speculation, in addition to widespread media attention, had contributed to the decline in confidence.
Author: Simon Herrmann
Apr 15, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.