Australia's consumer sentiment index bounces back by 2.7% in Jul 2023

13 Jul '23

2 min read

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In July 2023, Australia's consumer sentiment index rose 2.7 per cent to 81.3 despite a year of pessimism and still being 3 per cent below last year's level.
The cost of living and high interest rates, especially inflation, depress sentiment, as per an economic bulletin.
Only if inflation lowers and rates hold, sentiment could see a sustainable rise.

Australia’s consumer sentiment index rose by 2.7 per cent, from 79.2 in June to 81.3 in July 2023 despite the deeply pessimistic levels that have prevailed for just over a year now. Even with the latest modest lift, the Melbourne Institute of Consumer Sentiment index is still firmly in the 78-86 range and 3 per cent below its level of a year ago.

The main drags on sentiment throughout this period of depressingly low consumer sentiment have been the surging cost of living and sharply higher interest rates. Inflation was found to be the more dominant factor, according to a bulletin titled ‘Consumer Sentiment Fails to Respond to the Reserve Bank of Australia’s (RBA) Pause’ by Westpac Group’s chief economist Bill Evans.

As such, the key driver of this month’s lift is likely to have been the reported easing in the Australian Bureau of Statistics (ABS) monthly inflation indicator, from 6.8 per cent in April to 5.6 per cent in May. This is backed by responses over the course of survey week which suggest the RBA board’s decision to pause in July did nothing to boost confidence.

Sentiment was considerably more buoyant ahead of the RBA decision, with an index read of 88, up 11.2 per cent on June. Consumers remain wary about the interest rate outlook despite RBA’s pause. A sustained lift is only likely if inflation is much lower, and rates are firmly on hold.

Confidence in the labour market stays steady around long run average levels.

Fibre2Fashion News Desk (NB)

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