Investing.com-- Australian consumer sentiment deteriorated further in May, a private survey showed on Tuesday, as persistent concerns over sticky inflation and high for longer rates sparked little optimism over the economy.
The Westpac-Melbourne Institute consumer sentiment index fell 0.3% to 82.2 in early-May, extending declines after sliding 2.4% in April.
The index was close to record lows seen during the 2020 COVID pandemic, as a rising cost of living kept consumers largely pessimistic about the economy.
Signs of sticky inflation also sparked fears of more increases in interest rates, although recent comments from the Reserve Bank of Australia suggested that such a scenario was unlikely.
But the RBA is expected to keep rates high for longer in the face of sticky inflation, which unexpectedly picked up in the first quarter. Still, cooling consumer sentiment- which heralds limited spending- ties into the RBA’s expectations of cooling inflation in the coming months.
“...there has been no let-up in the weak consumer environment; and that, given the weak starting point and a very cautious mindset, consumers are more likely to use funds from fiscal measures to repair their finances than go on a spending spree that could undermine the RBA’s efforts to bring inflation back to target,” Westpac analysts wrote in a note.
Consumers had a largely positive response to the 2024 budget, the Westpac survey showed. Planned tax cuts by the government were also relatively well received.
The jobs market also remained among the few points of optimism, although sluggish wages kept this trend limited.
But any cheer was largely offset by fears that economic conditions will deteriorate rapidly in the near-term, which was the key driver of a downturn in sentiment through the month.