NAB: ‘9.5% Drop In Consumer Confidence An Overreaction’
The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 9.5% in August, as Victoria enters Stage 4 restrictions and COVID hotspots pop up in New South Wales.
“Under those circumstances it is certainly reasonable to have expected a sizeable fall in Consumer Sentiment. However, collapsing to only 5.1% above the lows we saw in April when consumers were first confronted with a national lockdown may well prove to be a significant overreaction,” said Bill Evans, Chief Economist at NAB.
“While some of the weakness in NSW and Queensland will reflect the direct economic drag from Victoria’s lockdown and the closure of interstate borders, the overall response seems disproportionate to the evidence on developments around the virus. This emphasises the fear of the unknown.”
In NSW consumer sentiment declined by 15.5%, ahead of Victoria’s fall of 8.3%. In Queensland it deteriorated by 8.1%, while South Australia was down 5.8%.
The ‘time to buy a major item’ sub-index in the Westpac survey dropped 13.2%. There was also a large spike in job loss concerns, though the ABS figures for July revealed that 114,700 gained employment.
The weekly ANZ-Roy Morgan Australian Consumer Confidence index decreased by 2.4% last week, marking its seventh weekly decline, longer than the six weeks of continuous decline seen during the first wave of the pandemic.
The ‘time to buy a household item’ category plunged by 8.6%, while ‘current economic conditions’ was down 8.2%.