Confidence plunges
Supply chain issues remain a major problem for the global economy, driving inflation higher.
After the initial spending surge, there are plenty of indicators from overseas suggesting that the demand side of the inflation equation is becoming less potent (second hand car prices, and Rolex prices, new home sales, etc.).
In Australia, retail and total household spending has held strong for now, but there are early signs of things rolling over.
The key AIG services performance index has sunk into contraction territory, for example.
Source: AIG
Consumer confidence is also looking desperate, dropping another -4.1 per cent this month, from 90.7 to 87, which is the lowest level since August 2020.
Source: ANZ Roy Morgan
Consumer confidence has sunk very deeply to decade lows, initial COVID lockdown period excepted.
In fact this reading matches the consumer confidence low of the global financial crisis, recording in October 2008.
It's worth noting that this shocking drop in confidence has taken place with a tiny cash rate target increase from 0.10 per cent to 0.35 per cent.
Yet markets are still pricing for interest rate hikes to continue unabated through the remainder of the year, and even well into the first half of 2023.
It seems that interest rate rises may continue until morale improves!
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The Reserve Bank's June monetary policy decision will be announced this afternoon.
