The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 2.0% to 102.2 in January
Bill Evans
The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 2.0% to 102.2 in January from 104.3 in December.
The 2% decline compares to the 5.2% drop seen in the first month of the delta outbreak in NSW, a 6.1% drop heading into Victoria’s ‘second wave’ outbreak in 2020 and the 17.7% collapse when the pandemic first hit in early 2020.
Westpac Chief Economist Bill Evans said: “This is a surprisingly solid result given the rapid spread of the omicron COVID variant over the last month.”
While the January sentiment result was resilient overall, responses over the course of the survey week – from January 10 to January 14 – showed a deterioration; suggesting some increased anxiety as the week progressed.
Mr Evans said the state breakdown provides some clues to the resilience of sentiment overall.
“Consumers in states impacted by ‘delta’ lockdowns appear to have been less unsettled by the rapid spread of the omicron variant than those in states experiencing their first major wave of COVID infections,” said Mr Evans.
While confidence increased in NSW (1.7%) and Victoria (4.1%), it posted significant falls in Queensland (–2.7%), Western Australia (–5.1%) and South Australia (–3.9%).
The detailed survey shows increased concerns about the outlook for both the economy and family finances. However, these were partially offset by a strong improvement in actual family finances and a slightly more positive attitude towards major purchases.
Consumers reported a significant improvement in their finances relative to a year ago. This sub-index lifted by 7.5% to 95.6, a nine-month high.
“This likely reflects a combination of improving incomes – particularly as labour markets rebound – wealth gains from a resurgent housing market and the accumulation of significant ‘reserves’ due to very high savings rates during lockdowns over the last two years. The latter, estimated to be worth around $250bn, may now be providing consumers with comfort given the return of virus disruptions.
“These savings will also be important when the omicron threat eases, providing the basis for a strong rebound in spending,” Mr Evans said.
