Consumer confidence experienced its sharpest weekly drop since the start of the CCP virus pandemic as states announce lockdowns one after another to contain the Delta variant of the coronavirus.
Currently, over half of all Australians are now in lockdown after South Australia announced restrictions were coming into force from 6 p.m. Tuesday, after five cases were detected in the state, joining the New South Wales and Victoria.
The ANZ-Roy Morgan consumer confidence index also plummeted by 5.7 points to 104.3, pushing the index below the weekly average for 2021. However, it was still higher than the same week in 2020.
The index also fell in both Sydney falling 4.8 percent, and Melbourne, 3.7 percent. However, it was actually Adelaide (9.5 percent) and Perth (8.2 percent) that led the fall, while Brisbane saw a slight increase.
ANZ Head of Australian Economics David Plank said sentiments to ‘buy a major household item’ were at the lowest levels since November 2020, which wasn’t surprising given the recent closure of retail stores.
“[This highlights] some renewed caution of households—albeit nowhere near the lows seen in the early stage of the pandemic,” he said.
Plank added that the average inflation expectations had been at or above the 4 percent mark for over a month, cementing the return to pre-COVID levels.
Further, Westpac economists have downgraded their growth forecast after they predicted a 0.7 percent contraction in the September quarter, or an $8 billion (US$5.8 bn) contraction, due to lockdown restrictions.
However, the minutes of the Reserve Bank of Australia’s board meeting on July 6 released today provides some optimism as members discussed the impacts of various lockdowns earlier last month.
“Recent COVID-19 outbreaks in many parts of the country, and associated restrictions, were considered likely to weigh on household consumption through the middle of the year,” the RBA said. “However, as observed following earlier lockdowns, spending was expected to rebound when containment measures were eased.”
Meanwhile, the Commonwealth Bank’s (CBA) latest Household Spending Intentions report reveals that people were spending more on health and wellbeing and education in June 2021 than June last year.
“Last month’s increased spending in health & fitness on the prior year reflected a continued heightened consumer focus on this area,” CBA Chief Economist Stephen Halmarick said. “Unfortunately, of course, this has changed again in July with the lockdowns in Greater Sydney and Melbourne.”