Consumer confidence falls sharply

Westpac consumer confidence for April is out and fell 5.1% to 104. Bill Evans reckons:

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.

While it was reasonable to expect the recent momentum in the Index over the last two months to have slowed in April, a 5.1% fall was not expected.

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.

When rate cuts took hold in the previous two cycles the Index surged by 37% (2009) and 18% (2002). The recent increase of 9.9%, now been marked down to 4.3%, looks much less convincing.

Reasons for the April fall are probably best assumed to be around global concerns and an associated correction in the share market. Since the last survey the ASX had fallen by 4.5%. The equity market probably best captures fluctuations in prospects for the global economy.

The disturbing news around Cyprus with associated risks around European stability may have unnerved respondents.

There was also some media coverage locally around prospects of rising interest rates perhaps as soon as year end. The decision by the Reserve Bank to hold rates steady at its April meeting was widely expected but would not have allayed any concerns about rising interest rates.

I’m a bit surprised but as much as Bill. It does just go to show that jittery is the new black. Look at the the big fall in time to buy a dwelling:

The soothing sounds of the RBA has its work cut out for it still.

er20130410BullConsumerSentiment.pdf by Catherine Lawrence