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22 May 2013
Flash: We still think an RBA cut in June remains unlikely - NAB
FXstreet.com (Barcelona) - As market participants continue to debate whether the RBA will decide to act with another interest rate cut at the next meeting, some analysts point to the recently released Westpac Consumer Confidence numbers as a sign that consumer sentiment hasn’t reacted as positively to the last rate cut as the RBA may have hoped.
According to David De Garis, Senior Economist at NAB Global, “the latest Westpac-Melbourne Institute reading of consumer sentiment was something of a cold shower and wake-up call on the state of the consumer mindset. After a positive start to the year with good reports on retail sales in January and February, March retail sales caused some pause for thought with its modest decline. That’s since been followed up by a material decline in consumer sentiment in April and now today’s larger May decline. Today’s sentiment decline was evident in all the question’s responses. Even so, combing through the detail, there was a larger fall in the Expectations component (-9.1%) than in Current Conditions (-3.9%)."
He went on to add, "for the RBA, this is a clear indication that consumer sentiment has taken a backward step and by extension that the tempo of consumer spending could well have slowed too through this quarter. The upcoming June RBA meeting (4 June) has, of late, been seen as a less likely time for the RBA to follow up with another interest rate cut. The market has, since the decline in the A$, been pricing in a less than 20% chance. Today’s consumer sentiment reading now makes that pricing a little light on. We’d still think that a June cut is unlikely, but this release brings next week’s CapEx into sharper focus as a prelude to Q1 GDP and the outlook for business investment as a driver of growth for the year ahead."
According to David De Garis, Senior Economist at NAB Global, “the latest Westpac-Melbourne Institute reading of consumer sentiment was something of a cold shower and wake-up call on the state of the consumer mindset. After a positive start to the year with good reports on retail sales in January and February, March retail sales caused some pause for thought with its modest decline. That’s since been followed up by a material decline in consumer sentiment in April and now today’s larger May decline. Today’s sentiment decline was evident in all the question’s responses. Even so, combing through the detail, there was a larger fall in the Expectations component (-9.1%) than in Current Conditions (-3.9%)."
He went on to add, "for the RBA, this is a clear indication that consumer sentiment has taken a backward step and by extension that the tempo of consumer spending could well have slowed too through this quarter. The upcoming June RBA meeting (4 June) has, of late, been seen as a less likely time for the RBA to follow up with another interest rate cut. The market has, since the decline in the A$, been pricing in a less than 20% chance. Today’s consumer sentiment reading now makes that pricing a little light on. We’d still think that a June cut is unlikely, but this release brings next week’s CapEx into sharper focus as a prelude to Q1 GDP and the outlook for business investment as a driver of growth for the year ahead."