After a lengthy divergence between measures of consumer sentiment and business confidence in Australia which began in 2014, confidence readings of the two sectors converged again around July 2018. Since then, both readings have deteriorated gradually, with consumer confidence leading the way. However, their respective paths have both fallen over a cliff in the last month and worse is expected as 2020 unfolds.
According to the latest Westpac-Melbourne Institute survey conducted in the second week of April, average household optimism dived after a modest decline in March. The Consumer Sentiment Index dropped from 91.9 to 75.6, its lowest reading since the 1990/1991 recession.
Any reading below 100 indicates the number of consumers who are pessimistic is greater than the number of consumers who are optimistic. The latest figure is well below the low end of the normal range and well below the long-term average reading of just over 101.
Westpac chief economist Bill Evans said, “This is the single biggest monthly decline in the forty seven year history of the survey, taking the Index beyond GFC lows to levels only seen during the deep recessions of the early 1990s and early 1980s.”
Local Treasury bond yields were largely unchanged, ignoring small falls offshore in overnight trading. By the end of the day, the 3-year ACGB yield had inched up 1bp to 0.28%, the 10-year yield had slipped 1bp to 0.92% while the 20-year yield finished unchanged at 1.63%.