Australia Westpac Consumer Confidence dropped sharply by -4.1% to 96.5 in July, hitting a two year low. The deterioration came as a surprise as confidence was not supported by recent positive developments, including RBA’s rate cuts and easing US-China trade tensions.
Deepening concerns over Australian economic outlook were the main drivers in decreasing confidence. Expectations in economic conditions for the next 12 months dropped -12.3 to 87.1. That’s the lowest level in four years. For the next 5 years, expectations index dropped -6.7 to 91.6.
After two rate cuts in June and July, Westpac expects RBA to stand pat at next meeting on August 6. Updated economic projections to be released then would give the best guide to how the RBA sees the case for further policy action. Westpac expects a further 25bps cut most likely coinciding with a downgrade to the Bank’s growth and inflation forecasts in November. Though, it said “the timing of this next move remains highly uncertain”.
Fed George: Inflation expectations can move quickly
Kansas City Fed Esther George said in Helsinki today that inflation expectations “can move quickly”. “It doesn’t look like it will happen in the near term,” but she also emphasized “I never say never… because you don’t know how those expectations might shift.”
Meanwhile, George also noted the median forecast for long-term interest rates has fallen. And, demographic trends have forced a reassessment of the economy.