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Confidence plunges as inflation jumps

Consumer confidence declined 6.0 per cent last week, as headline inflation surged to 5.1 per cent y/y in Q1 2022. Among the major states, confidence dropped in NSW, Queensland and SA, while it increased in Victoria and WA.


• ‘Weekly inflation expectations’ rose 0.2ppt to 5.3 per cent, while its four-week moving average dropped 0.1ppt to 5.4 per cent.


• Four of the five confidence subindices registered losses. ‘Current financial conditions’ decreased by 5.2 per cent and ‘future financial conditions’ fell 5.3 per cent.


• ‘Current economic conditions’ dropped 10.4 per cent, offsetting all its gains from the past four weeks. ‘Future economic conditions’ bucked the trend by increasing 0.7 per cent.


• ‘Time to buy a major household item’ declined 10.3 per cent, after an 8.7 per cent rise over the previous four weeks.


"Consumer confidence plunged 6.0 per cent last week, its sharpest fall since the 7.6 per cent drop in mid-January due to the Omicron surge. The strong inflation result of 5.1 per cent y/y was likely the primary driver of the drop in confidence as it increases the prospect of interest rate hikes by the RBA in the near future." ANZ Head of Australian Economics, David Plank said. 


"This is supported by the fact confidence dropped 9.6 per cent amongst people ‘paying off their home loan’, while for people who already own their home or are renting confidence dropped by 4.7 per cent and 4.2 per cent respectively.


Inflation expectations increased 0.2ppt to 5.3 per cent last week as average petrol prices rose nationally. This is the lowest level for consumer confidence at the start of a tightening cycle since the inflation targeting regime began in the early 1990s. This may see the RBA tighten more slowly than the market is pricing."



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