Consumer confidence levels have taken a beating over the last month with the latest Westpac-Melbourne Institute Survey of Consumer Sentiment showing a 6.9% decline from 102.4 points in May, to just 95.3 points in June.
Consumer confidence rose strongly after the Coalition government released its second Federal Budget last month, offering support to small businesses and families in an attempt to spark greater economic activity, together with the RBA's interest rate cut.
But that burst of confidence has now been described as a brief 'relief rally' with consumers once again focusing on the headwinds facing the Australian economy, such as low business spending plans and a sense of job insecurity. It's possible that many are also fixated on the heavy falls endured by the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), with the benchmark index down 8.8% since late April, as well as the outlook for house prices.
At 95.3 points, consumer confidence is now below the key 100-point level which shows the balance between optimism and pessimism in the market, while it is also 1% below its pre-Budget level and the weakest reading since the beginning of the year.
The local sharemarket has not responded well to the survey's results, slipping 0.2% to 5463 points. The nation's retailers have been hit hard with companies such as Harvey Norman Holdings Limited (ASX: HVN), JB Hi-Fi Limited (ASX: JBH) and Myer Holdings Ltd (ASX: MYR) down between 1.4% and 2.6%. Woolworths Limited (ASX: WOW) shares also fell 0.2% for the day.
Given the recent capital expenditure forecasts (which were described as being at "recessionary" levels), today's poor consumer confidence could certainly give the Reserve Bank of Australia something to think about next month when they meet again to decide on the future of interest rates. Perhaps we'll see the cash rate fall to just 1.5% by the end of the year after all…
