By Matthew Henry
MELBOURNE: In worrying news for retailers of major electrical appliances, a leading consumer sentiment index released by Westpac today reveals consumers are significantly less willing to buy a “major household item” than a month ago.
The Westpac Melbourne Institute Index of Consumer Sentiment found consumer confidence reached its lowest point in 15 years during March and suffered its sharpest fall in 30 years for the three months prior.
Westpac chief economist, Bill Evans, said three of the five major indicators in the report registered a fall.
But the standout finding in the March report was a decline in the number of consumers willing to make a major purchase for their home.
“Of most concern was the collapse in sentiment towards buying major household items,” said Evans.
“That component fell by 12.7 per cent to be down by 45.8 per cent over the year, compared to the annual fall of 24.2 per cent in the overall index.
“A sophisticated statistical analysis by the Melbourne Institute indicates that this ‘buying conditions’ component is significant in explaining consumption trends.”
The report certainly squares with widespread reports in the electrical retail trade of terrible trading conditions during March.
Westpac highlighted an increase in mortgage rates and higher fuel prices as factors causing consumers to tighten their belts.
“With the Reserve Bank not raising interest rates since the last survey it is reasonable to have expected some modest recovery in the Index this month,” said Evans.
“However, this further fall emphasises just how concerned households must be with the current economic environment.”
Evans said the RBA is unlikely to raise interest rates this month, or in May.