Consumer confidence has plunged 17.7 per cent in April to 75.6 as the coronavirus crisis continues to grip the nation.
According to the Westpac-Melbourne Institute Index of Consumer Sentiment, this is the single biggest monthly decline in the 47-year history of the survey, taking the index beyond GFC lows to levels only seen during the deep recessions of early 1990s and 1980s.
Interestingly, however, the lows in previous recessions were reached after one to two years of continuous deterioration compared to the one month collapse experienced this year.
Westpac chief economist Bill Evans said the details of the survey are “all very disturbing” and reflect the large shocks to jobs and spending.
And, according to CBA’s latest spending data, household spending decisions are being affected by the enforced lockdown. Some of the spending patterns that emerged early are now reversing.
For example, spending on food, alcohol and health, which grew strongly in early March 2020, are now returning to more normal, or below normal levels.
Alcohol spend is down -31 per cent, while food is down -12 per cent and clothing dropped -21 per cent.
Evans said the Australian government’s widespread shutdowns on movement and social activity have “effectively banned many forms of economic activity”.
He added: “While the drop in confidence this month is severe, it could well have been worse. Despite the bleak and threatening backdrop, Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad.”
The biggest falls in consumer confidence were in the near term outlook for the economy and in attitudes towards spending – reflecting the immediate effects of the shut-down.
The ‘economy, next 12 months’ sub-index recorded a spectacular 31 per cent drop (the biggest monthly fall on record), taking it to 53.7. That compares to a low of 53.2 during the GFC and lows during previous recessions of 34.2 (early 1990s) and 42.1 (early 1980s).
Evans said: “We suspect the relatively resilient medium term view on the economy reflects the expectation that virus disruptions will be temporary whereas respondents were unable to envisage the sequence of events that would rescue the Australian economy in the 1980s and 1990s recessions.”
Component-wise, the biggest drop in April was in the ‘time to buy a major household item’ sub-index, which posted a 31.6 per cent plunge – the sharpest on record – to 76.2.
Evans said the plunge likely reflects multiple factors including health concerns around being in shopping environments, ‘social distancing’ restrictions making shopping more difficult, direct pressures on family budgets and a reluctance to make ‘big ticket’ purchases at a time of heightened risks around the economy and job security.
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