Shoppers have closed their wallets and locked themselves down as Omicron drives consumer confidence to levels unseen since 1992
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Shoppers have tightened their pursestrings and locked themselves down through January, as consumer confidence tallies its worst post-Christmas performance in 30 years.
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ANZ-Roy Morgan’s consumer confidence index has spiralled to record its lowest result since 1992, a year when the Australian economy was turning the corner on a major recession and saw its highest-ever unemployment rate.
The index found that consumer confidence dropped 7.6% last week, as the Omicron variant continues to shutter businesses around the country as workers are forced off the job as a result of rapid antigen test supply shortages.
According to ANZ, all of the index’s key measures were in the red. Confidence in “current financial conditions” dropped 11.3%, while the outlook fell too, as confidence in “future financial conditions” dropped 4.3%.
About 19% of respondents said they expect this time next year to be even worse, and ANZ’s spending data up until Tuesday reflects the sentiment.
According to the bank, debit and credit card spending dropped 27% over the first half of January, a decline of more than 10 percentage points heavier than the previous January.
David Plank, head of Australian economics at ANZ, said consumer confidence is now below the “neutral level” of 100 in all states, but remains just above neutral in the ACT and Northern Territory.
“It is also lower than the level during the Delta surge. Consumer confidence readings are usually positive during the month of January and the level of 97.9 is the weakest January result since 1992, when the Australian economy was experiencing sharply rising unemployment,” Plank said.
“We don’t think the economy is as weak as these data might suggest, with the shock of the Omicron surge and strains on testing capability the key drivers of the fall rather than underlying economic conditions,” he said.
Video: World Bank cuts growth forecast (Sky News Australia)
“But the result highlights that concerns about COVID have the potential to significantly impact the economy if they linger.”
Over at the Commonwealth Bank of Australia, spending debit and credit card spending also took a tumble during the first two weeks of January. According to the bank, spending took a 3% fall, compared to last year.
Stephen Wu, an economist at CBA, said the result suggests early panic may be overblown, and that the drop is not a bad result considering the number of Australians currently in isolation.
“With a large number of people in isolation we have seen spending on services slow sharply. Services spending had been recovering strongly since restrictions were eased from October,” Wu said.
“However, spending on goods has held up well. Online spending growth remains firm, while in‑store spending is a little lower.”
Even still, economists at ANZ found that consumer confidence in “current economic conditions” decreased by 7.6% through January, while confidence in “future economic conditions” also softened, this time by 3.9%.
The findings emerge on the heels of those pitched by Chief Richardson, head of Deloitte Access Economics, who in the firm’s quarterly Business Outlook released Monday predicted the Australian economy will see growth of 3.6% in 2022, even amid the worst of Omicron.
He said the tug-of-war between vaccinations and COVID mutations will continue, and that the economies with the highest triple vaccination rates will deliver the year’s strongest growth.
“Australia is now much more match fit for fighting COVID: we’re well vaccinated, we’ve got the hang of juggling lockdowns and other COVID challenges, and we’re cashed up with dollars left over from when the pandemic meant that money couldn’t readily be spent,” Richardson said.
“That combination spells resilience and recovery.”
So much so, Richardson said, that the only material challenge the Australian economy may face through 2022 is likely to be major economic softening in China, Australia’s number one trading partner.
Only hours after the Deloitte report was published, China’s central bank cut its key interest rate for the first time in nearly two years, in an effort to prop up an economy that has taken major blows thanks to unrelenting COVID-19 outbreaks out of step with the nation’s COVID-zero ambitions.
The People’s Bank of China made the move after China’s gross domestic product grew at its slowest pace in 18 months, by just 4%, confirming a severe loss of momentum across the Chinese economy, which some analysts say should sound early alarms for Australia.
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Source: Thanks msn.com