SYDNEY (Reuters) – A measure of Australian consumer sentiment slid for a sixth straight month to a 21-month low in May as surging inflation and rising interest rates weighed on family finances and spending intentions.
The Westpac-Melbourne Institute index of consumer sentiment released on Wednesday sank 5.6% in May from April, when it fell 0.9%. The index was down 20.1% from May last year at 90.5, meaning pessimists far outnumbered optimists.
The gloomy mood could spell trouble for Prime Minister Scott Morrison who faces an election on May 21 and is running consistently behind in opinion polls.
“Two stunning developments are clearly unnerving consumers,” said Westpac chief economist Bill Evans.
“Firstly, on April 27, headline inflation was reported to have lifted above 5% for the first time since 2007. Then, on May 2, the Reserve Bank raised the cash rate for the first time since 2010.”
The Reserve Bank of Australia (RBA) raised interest rates a quarter point to 0.35% and warned that more hikes would be needed to restrain runaway inflation.
The increase in borrowing costs only adds to price pressures from petrol, housing and food, and saw the survey’s measure of family finances over the next 12 months dive 11.2%.
Finances compared with a year ago edged up 0.3%, but that followed a sharp fall in April.
In an ominous sign for retailers, the survey’s measure of whether it was a good time to buy a major household item dropped another 5.7% to be down a steep 24% on a year ago.
Consumers were equally downbeat on the future with the survey’s measure of the economic outlook for the next 12 months off 5.8%, while the outlook for the next five years lost 4.1%.
(Reporting by Wayne Cole; Editing by Sam Holmes)