Consumer confidence makes record gains in April: Westpac

Consumer confidence bounced back from crushing lows to post record gains in April as the nation’s path to normality became clearer.

With restrictions being eased across Australia and in New South Wales the numbers of shoppers and workers are slowly increasing in the CBD in Sydney. Picture: AAP

Squashing the spread of the COVID-19 virus, married with a concrete plan to lift social distancing restrictions, has buoyed the nation’s mood and led to an “impressive recovery” in consumer confidence, Westpac’s latest survey shows.

The bank’s widely followed monthly confidence index bounced from April’s all-time lows, albeit to still relatively weak levels by historical standards, recording its biggest gains on record hard on the heels of the largest drop in history.

“This represents an impressive recovery in confidence,” Westpac chief economist Bill Evans said.

“Consumers are clearly heartened by Australia’s success in containing the coronavirus which has justified the easing of some of the social restrictions that have been so painful for individuals and the economy over the last two months.”

The Westpac-Melbourne Institute Index of Consumer Sentiment rebounded 16 per cent to 88.1 in May, from all-time lows of 75.6 in early April when the eventual scale and economic damage of the outbreak remained frighteningly unclear.

“The despair apparent a month ago, when Australians were bracing for a severe outbreak and a prolonged shutdown has lifted materially, but consumers are still justifiably cautious,.” Mr Evans said.

The survey was carried out between May 4 and 8, which included the lead up to and actual announcement of the government’s three-stage plan to ease restrictions, presented on Friday.

‘Consumer sentiment among those unemployed and actively looking for work is actually higher than that for the wider population’

There were “extraordinary” gains in industries hardest hit by the social distancing measures.

Sentiment improved by over 30 per cent for those working in the hospitality, health and consumer services industries.

There were also outsized gains in confidence in states which had recorded very low rates of new infections and where the prospect for lifting restrictions was strongest. Sentiment in Western Australia surged 29 per cent, and in NSW by 23 per cent.

In contrast, Victorian consumer sentiment only gained 8 per cent as the state took a more cautious approach to easing social mobility.

There was also evidence that the prospect of kids going back to school was a tonic to parents. By age group, there was a notably large improvement in sentiment – by 23 per cent – in 35-54 year old respondents.

By subindex, the question asking about sentiment around the economy over the next 12 months surged a “spectacular” 33 per cent, Mr Evans said.

“The prospect of an earlier than expected reopening for the economy has soothed some of the worst fears around the economy although readings imply consumers still do not expect a return to growth any time soon,” he said.

An additional question around rent indicated that one in five tenants have negotiated a temporary reduction in rental payments, with most being a cut of 25 per cent or less.

Respondents also presented a much more confident outlook on job security and prospects, Mr Evans said.

“There is clearly an expectation that a return to more normal conditions will allow many workers displaced by the coronavirus shutdown to return to their jobs. Indeed it is notable that consumer sentiment among those unemployed and actively looking for work is actually higher than that for the wider population”, of 93 points versus 88.1.