Consumer Sentiment Sours in Australia, Egypt, and Canada
Key Takeaways
Morning Consult tracks consumer sentiment in 43 countries. In June, consumers globally gave mixed signals, even within the different regions.
While sentiment improved in South Africa, Austria and Ireland, among others, for much of the world where Morning Consult surveyed consumer sentiment, the prevalent color was yellow, indicative of stable consumer sentiment.
The sharpest drop was in Australia, although Egypt and Canada also experienced declines.
This month we will highlight several countries with high consumer sentiment drops:
Australia: The case to remain vigilant
Consumer sentiment in Australia dropped significantly in June. While there was no singular reason driving the downturn in sentiment that began at the beginning of May, all income cohorts experienced the dip in sentiment although the onset of this downturn began at different times.
Australian households continued to spend in the first quarter and spending estimates the previous 18 months have been revised upwards. Spending has been strongest on essential goods as well as services, particularly air travel. One downside to this continued strength in expenditures has been a dip in the savings rate. Although not as low as the third quarter of 2023, the household savings rate dipped once again in the first quarter of 2024. With wage growth passing its peak and inflation rates still high, continued spending growth (albeit slower than post pandemic rebound) has been putting pressure on household budgets.
In June, Australian inflation registered another uptick, with rents and energy prices continuing to rise at a robust level. While several other central banks have cut interest rates, for the Reserve Bank of Australia (RBA), this option is not in the cards. After the RBA’s last meeting in June, Governor Bullock noted that “the need to remain vigilant to the upside risk to inflation” and that “the case for a rate cut was not considered.” With interest rates remaining high, inflation continuing to climb, and wage increases peaking, Australian households are feeling the financial strain, which led to a significant drop in sentiment last month.
Egypt: Will the cash infusion keep the lights on?
Consumer sentiment in Egypt has been on a rollercoaster so far this year. In the first seven weeks of the year, sentiment dropped precipitously, reaching its lowest level (since tracking began in October 2021) during the week of February 5th. The Egyptian economy faced multiple challenges at the beginning of the year: ranging from the spillover effects from the war between Israel and Hamas affecting its tourism revenue, to Houthi attacks altering shipping routes and slashing Suez Canal revenues. In addition, with inflation running hot, consumer sentiment turned sour.
In February, the Egyptian economy began to receive much needed foreign reserves, beginning with the United Arab Emirates’ $35 billion investment, followed by the expansion of the IMF loan to $8 billion, the World Bank promising $6 billion over the next three years and the European Union pledging $8.1 billion in early March. The same month, the central bank also floated the Egyptian pound and raised the interest rates by six percentage points, which resulted in rapid depreciation of the Egyptian currency. Although the aid has helped sentiment improve over the months of March and April, sentiment began to fall once again, quickly approaching its previous lowest levels. Despite improvements over the last months, inflation still remains very high in Egypt. Due to consecutive heat-waves, the country has been experiencing persistent power cuts. The increase of interest rates coupled with depreciation of the Egyptian pound will likely keep consumer sentiment in low levels unless the new cabinet provides impactful changes to the Egyptian consumer.
Canada: Reversion to April levels
The Bank of Canada became one the first in G-7 economies to cut interest rates on June 5, 2024. This significant move was widely anticipated, especially after April inflation figures (released late May), which marked the lowest inflation in the last three years. Although May figures saw another slight uptick, in June, the annual inflation rate went back to April levels. This may prompt the Bank of Canada to introduce further easing in its next monetary policy decision on July 24th. That said, consumer sentiment will continue to see its ups and downs as the effects of the easing in monetary policy takes time to materially affect consumers. While the point change between June and May may have seemed large, consumer sentiment in Canada has not changed significantly in either direction. In fact, it continues to be on a broad upward trajectory.
Deni Koenhemsi leads Economic Analysis at Morning Consult. Previously, she was a senior associate at S&P Global, where she managed a team of economists, forecasted commodity prices and advised Fortune 500 companies on their procurement and planning decisions. She received a bachelor’s degree in international relations from the University of Richmond and a master’s degree in international economics from American University. For speaking opportunities and booking requests, please email [email protected]