Australian consumer confidence held steady in April as a raft of upbeat news on the economy helped counter higher petrol prices and talk of a rise in official interest rates, a private survey showed yesterday.
The Westpac-Melbourne Institute Index of Consumer Sentiment held at a seasonally adjusted 110.7 in April,
following three straight months of gains. The index was 5.4 per cent higher than in April last year.
"Ordinarily it would have been surprising that consumer sentiment did not increase for a fourth consecutive month, given the range of encouraging economic news," said Bill Evans, Westpac's head of economics.
Figures on retail sales, exports and employment all surprised with their strength while the sharemarket hit record highs.
However, that very strength stirred much media speculation about an imminent increase in interest rates from the Reserve Bank of Australia (RBA). This may have had a dampening effect, though the survey found confidence among respondents with mortgages actually rose in the month.
"The key factor that probably constrained confidence was the 4 per cent jump in petrol prices in the last week before the survey," said Evans.
That rise shows no signs of stopping with petrol up A11c a litre in Sydney this week.
Analysts at JP Morgan calculate that if the recent rise in petrol prices is sustained, it would bleed more than A$700 million ($834 million), or about 4 per cent, from monthly retail sales.
"Clearly, this will leave an even larger hole in household finances, which is a compelling reason for the RBA not to inflict additional near-term economic pain on households in the form of higher interest rates," said Stephen Walters, Morgan's chief economist.
There are some hints that spending may have cooled in March, after two months of acceleration. Economists at Westpac note that figures on debit card transactions from CashCard released last week implied a 0.9 per cent fall in March retail sales.
"Retail clients I've talked to, say they've had a great start to the year," said Rob Henderson, chief economist markets at NAB. "The problem is that it's happening when the economy is already near full employment and has little spare capacity," he added. "That's why we think the RBA will have to tighten at some point in the next few months."
- REUTERS
