Consumer confidence fades in response to Melbourne lockdown

From

Bill Evans

The Westpac-Melbourne Institute Index of Consumer Sentiment fell 5.2% to 107.2 in June from 113.1 in May. The Index has now fallen by 9.7% over the last two months.

According to Westpac Chief Economist Bill Evans, the latest fall in June is almost certainly due to concerns around the two-week lockdown in Melbourne. The survey was conducted during the first week of the lockdown.

The Index is now back at the level we saw in January when the country was impacted by significant lockdowns in parts of Sydney and Queensland. The fall in the Index between the surveys in early January and December – when the country had been comfortably reopening with memories of lockdowns fading – was 4.5%, comparable to the fall we are now experiencing.

In yesterday’s survey we have seen a fall of 7.5% in Victoria, 4% in Queensland, 9% in Western Australia, and 10.9% in South Australia. In contrast, the Index in NSW fell by 1.1% highlighting the confidence the state has in its capacity to contain the virus.

Sentiment in NSW is now 15.4% above Victoria; 11% above Queensland; 19.3% above Western Australia; 14.4% above South Australia and 29.6% above Tasmania.

Bill Evans said: “That resilience in NSW, our largest state, will be very important for supporting national sentiment and, in turn, sustaining the economic recovery.”

Housing-related sentiment continues to show significant signs of stress. The ‘time to buy a dwelling’ index recorded its fifth monthly decline in a row, dropping 7.1% in June to  be 27% below its November level.

Surging prices and rapidly deteriorating affordability are clearly starting to weigh heavily on buyers, suggesting owner occupier activity, particularly first home buyers, is likely to fade.

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