Petrol price shock lifts inflation fears and dents sentiment
Consumer sentiment weakened sharply last week, with the ANZ-Roy Morgan consumer confidence index falling 5.4 points to 63.1. Its four-week moving average also eased, down 4.3 points to 70.5.
Inflation concerns moved the other way. Weekly inflation expectations rose by 0.2 percentage points to 6.9%, while the four-week average increased from 5.8% to 6.3%.
Households also reported a deterioration in their finances. The measure of current financial conditions over the past year fell by six points, while expectations for financial conditions over the next 12 months dropped by nine points.
Views on the economy were mixed. Short-term economic confidence for the coming year declined 3.9 points, but medium-term confidence over the next five years edged up 1.1 points.
Spending intentions softened further, with the “time to buy a major household item” subindex down 9.5 points.
“ANZ-Roy Morgan Australian Consumer Confidence fell to its lowest since records began in 1973,” said Sophia Angala (pictured right), economist at ANZ. “The impacts of the Middle East conflict on oil prices and the economic outlook are likely behind the drop, along with the RBA’s decision last week to increase the cash rate to 4.1%.
“With very large increases in petrol prices through March, inflation expectations rose to an all-time high last week. Household confidence in their current and future finances weakened sharply, as did the ‘time to buy a major household item’ subindex, which is at its lowest since late March 2020 when pandemic lockdowns were announced.
“Concerns around upside inflation risks and urgency to keep inflation expectations anchored are likely to support a final 25-basis-point rate hike by the RBA in May, taking the cash rate to 4.35%.”
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