Consumer sentiment alarmingly low

Posted by Daniel Palmer on 21st May 2008

Despite the traditional post-budget bounce, Australian consumer sentiment is still at worrying levels.

The Westpac-Melbourne institute index of consumer sentiment, released today, rose to 89.8 index points from 87.4 points in April, a rise of 2.7 per cent. The improvement is considered minimal in light of a 7.5 per cent increase after last year’s budget, coupled with the fact that the figure last month was the lowest recorded for 15 years. The limited retreat from April’s low indicates rising inflation and the threat of higher interest rates are still playing on the minds of consumers.

Restaurateurs and cafe owners may have cause for concern as consumers start to look for ways to cut back on spending. Time-poor consumers may begin to avoid restaurants and head to the frozen food aisle of the supermarket in order to cut back on spending. Although, it must be noted that, in past times of economic distress consumers have not completely abandoned restaurants, with data implying that the number of restaurant visitors merely stagnates rather than declines.