© Bloomberg. Shoppers walk past stores on Degraves Street in Melbourne, Australia, on Sunday, Nov. 7, 2021. Australian retailers suffered their worst quarter of sales on record as coronavirus-induced lockdowns along the nations heavily populated east coast slashed spending, underscoring expectations the economy contracted in the period. Photographer: James Bugg/Bloomberg
(Bloomberg) — Australian household sentiment dropped this month in response to a surge of coronavirus cases that exacerbated existing supply chain problems and prompted shoppers to turn more cautious.
The consumer confidence index fell 2% to 102.2 points in January, Westpac Banking (NYSE:) Corp. said in a statement Wednesday. Optimists still outnumbered pessimists, with 100 points the dividing line between the two.
Westpac Chief Economist Bill Evans said the result was much better than the 17.7% collapse when the pandemic first hit in early 2020. Moreover, consumers in Australia’s two most populous states, which endured protracted lockdowns around mid-2021, seemed “less unsettled by the rapid spread of the omicron variant than those in states experiencing their first major wave of Covid infections,” he said.
The omicron outbreak is forcing supermarkets to impose purchase limits on products and leaving firms struggling for staff as infected workers are forced to isolate. That’s likely to slow a recovery in the $1.5 trillion economy in the short-term at least, with a slew of growth forecast downgrades from economists.
“The component detail shows increased concerns about the outlook for both the economy and family finances,” Evans said. “Consumers’ near-term expectations for the economy showed the biggest fall.”
High frequency data from Australian banks have shown omicron variant kept shoppers at home during the Christmas holiday period.
Westpac’s survey showed consumers reported a significant improvement in their finances from a year ago, with the sub-index lifting 7.5% to a nine-month high of 95.6. That likely reflects a solid rebound in employment, wealth gains from a resurgent housing market and the accumulation of significant reserves due to high savings rates during lockdowns, according to the report.
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