© Reuters. Australian Consumer Confidence Drops on Delta Variant Lockdowns
(Bloomberg) — Australia’s consumer confidence declined this month, though not as far as might have been feared given its two largest cities are under stay-at-home orders to try to contain an outbreak of the delta variant of coronavirus.
The sentiment index dropped 4.4% to 104.1 points in August, the lowest point in a year, Westpac Banking (NYSE:) Corp. said Wednesday in a statement. But optimists still outweighed pessimists, with 100 points the dividing line between the two.
“This is a significant further loss of confidence but better than might have been expected,” said Matthew Hassan, senior economist at Westpac. “The virus situation locally is clearly troubling, but consumers appear reasonably confident that it will come back under control, and that once it does, the economy will see a return to robust growth.”
The highly contagious delta variant has caused shutdowns across the nation’s eastern coast, its most populated area. The Reserve Bank of Australia estimates household spending drops about 15% during lockdowns and has acknowledged the economy will likely contract this quarter.
Still, the RBA expects a solid recovery to resume, and has decided to stick with plans to taper bond purchases for now.
The apparent resilience of consumer sentiment will give some comfort to the RBA, suggesting the consumer and the wider economy remain well placed to snap back once virus restrictions ease, Hassan said.
Sydney has been hitting record daily infections despite being in its seventh week of strict stay-at-home orders. The city accounts for 25% of Australia’s output and 22% of employment. The crisis reflects a tardy vaccine roll-out that’s left the population vulnerable to the delta variant during the southern hemisphere winter.
“The availability of effective Covid vaccines is a key source of support for confidence,” Hassan said. “Notably, sentiment is much stronger amongst those that have either been vaccinated or plan to get the jab.”
The poll was based on responses from 1,200 people and conducted from Aug. 2-7.
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