The Westpac/Melbourne Institute consumer sentiment rebounded in April, but fell again in May following the surprise rate hike by the RBA (Reserve Bank of Australia). The chart below shows the consumer sentiment index before and after extreme adjustment. Note the twin downward "spikes" in 2020 when lockdowns were imposed, which my extreme-adjustment algorithm removes. Consumer sentiment is back at Covid lockdown levels.
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| Click on the chart to see a clearer image |
Comparing the extreme-adjusted Judo Bank PMI for Australia and the consumer sentiment index shows just how closely the two indicators move. It seems likely that the upward "spike" in the services PMI in April (not shown in the charts) will be reversed in May, just like the jump in consumer sentiment fizzled in May. We'll know in a week or so.
I remain convinced that the economy will slip deeper into recession, especially since China's recovery appears to be fizzling.
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