Australian consumer confidence has been dragged down by deteriorating sentiment in New South Wales and Victoria, the regions hardest hit by COVID-19.
On Wednesday (15/December), Westpac Banking Corp. released data on Australian Consumer Confidence which decreased by 1 percent from 105.3 to 104.3 in December. However, the level of consumer confidence which is still stable above the 100 level indicates that optimism is still more dominant than pessimism.
In further detail, the economic conditions sub-index for the next 12 months weakened from 106.6 to 104.9. Similar conditions were also seen in the sub-index of economic conditions for the next 5 years, which fell slightly from 111.0 to 110.4.
On the other hand, other sub-indexes such as family finance rose from 88.1 to 89.0. The increase was also seen in the family's financial outlook for the next 12 months which increased from 108.9 to 111.2 in December.
Regionally, there are significant differences between the states worst hit by COVID-19, namely New South Wales and Victoria. Consumer confidence in both regions fell significantly, dropping to 3.6 percent and 3.5 percent, respectively. Meanwhile, sentiment recorded the most significant increase in South Australia (+7.1 percent), Queensland (+3.4 percent) and Western Australia (+3.2 percent).
The Australian economy is actually still overshadowed by the impact of the COVID Delta and the presence of the Omicron variant. However, an increasingly tight labor market has driven the upward trend in wages in recent times, underpinning increased consumer optimism about their financial condition.
AUD/USD Await Fed Announcement
The release of Australian Consumer Confidence data this morning did not have a high impact on the movement of the Australian Dollar against the US Dollar. The pair AUD/USD is currently up 0.1 percent from its daily open price of 0.7111, confined within a narrow range since the past week.
The slight strengthening of the AUD this morning was due to investors' profit-taking in the midst of anticipation ahead of the Fed's monetary policy announcement on Thursday early tomorrow. It is possible that the pair will resume its bearish trend if the Fed confirms the acceleration of the tapering rate which will increase the prospect of a rate hike in the near future.
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