Consumer sentiment stumbles
Consumer sentiment has once again proven to be a fickle beast, having dropped by over five per cent in April following a stellar return to form in March.
The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 5.1 per cent in April to 104.9 points, down from the heady heights of 110.5 per cent last month.
"This is a surprising result. The Index had risen by 9.9% over the previous two months and it appeared that, finally, after the Reserve Bank had been cutting interest rates for more than 12 months that the rate cuts and a more settled world economy were gaining real traction with consumers,” Westpac’s Chief Economist Bill Evans said.
Mr Evans said that while the momentum over the last two months was expected to ease, a sharp decline took everybody by surprise.
“This result emphasises how fragile consumer confidence has become in the current environment. In fact, the Index is now only 1.5% above its level in November 2011, following the Reserve Bank's first cut in this easing cycle and only 0.6% above the print from last November.”
Mr Evans said the fall most likely came as a result of the international share market jitters, with the ASX having shed 4.5 per cent since the last reading.
“The disturbing news around Cyprus with associated risks around European stability may have unnerved respondents,” Mr Evans concluded.
All five components of the Index were down in April: the sub-indexes tracking 'family finances compared to a year ago' (down 3.9%); 'outlook for family finances over the next 12 months' (down 0.2%); 'outlook for economic conditions over the next 12 months' (down 4.5%); 'outlook for economic conditions over the next 5 years' (down 8.3%); and 'time to buy a major household item' (down 7.6%)