Australia's consumer pessimism continues as inflation fears dominate

“Renewed cost-of-living pressures and inflation concerns have more than offset what looks to have been a relatively well-received federal budget. Consumer sentiment remains deeply pessimistic. While expectations improved a touch in May, this was overshadowed by a further deterioration in current conditions and fears that persistently high inflation may require further interest rate rises,” Westpac senior economist, Matthew Hassan, commented.

The survey responses point to continued spending restraint by consumers heading into the second half of the year, Hassan said in a press release from Westpac Institutional Bank, a division of Australian multinational banking and financial services firm Westpac Banking Corporation.

The budget also appears to have eased inflation and rate rise concerns rather than added to them, he noted.

Consumers were slightly more positive about the outlook for both family finances and the economy in May, but this was completely offset by a deterioration in current assessments of family finances and buyer sentiment, he said.

The survey results suggest consumers will use tax relief as an opportunity to repair their finances and rebuild saving buffers rather than spend, he said.

“Consumers remain relatively comfortable about the jobs outlook, although the outright confidence that was starting to emerge earlier this year has evaporated. The Westpac Melbourne Institute unemployment expectations index rose 4.1 per cent to 129.8, slightly above the long run average of 129,” he said.

“There has been no let-up in the weak consumer environment; and that, given the weak starting point and a very cautious mindset, consumers are more likely to use funds from fiscal measures to repair their finances than go on a spending spree," Hassan added.

Fibre2Fashion News Desk (DS)