Consumer confidence at 10-year high

The Westpac-Melbourne Institute Index of Consumer Sentiment is lifted by 4.1% to 112 in December, reaching the highest level since 2010. The consumer confidence index hits a 10-year high indicating that sentiment has fully improved from the COVID recession.

The highlights of the index are mainly centralized around the speed of the recovery seen after just eight months into the pandemic compared to the GFC and the recession seen in the early 1990s:

• The index is already 48% above the April lows whereas, during the GFC, sentiment had only recovered by around 8.4% after eight months.
• In the early 1990s, it took nearly three years for sentiment to improve from the lows.

The stark difference in the recovery period is related to the prompt and coordinated efforts from the government and central bank. In an attempt to contain the economic damage from the pandemic, the government and the RBA have injected a massive amount of liquidity in the economy in a timely manner.

Compared to the international situation where major economies are trapped by the deteriorating pandemic situation, domestic views on the economic conditions, budget and taxation, political move, and employment have improved.

Westpac has revised its growth and unemployment forecasts – revised its growth forecasts to 2% in 2020 and 4% in 2021 and lowered its forecasts for unemployment to 6% by end 2021 and 5.2% by end 2022.

The Aussie Dollar

The Antipodean currency which was among the top gainers lifted by the better containment of the virus as compared to other major economies continues to edge higher against a weak US dollar. The additional funding from the central banks, governments, strong economic confidence, and good improvement in overall economic conditions have helped the Aussie dollar to power higher.

As of writing, the AUDUSD pair is currently trading closer to 0.7440 and is moving towards the higher levels seen this week.

Source: GO MT4