Confidence data to provide rate response

·3-min read

A series of consumer and business confidence surveys this week will provide a guide to future spending and investment in the face of rising interest rates and inflation in Australia.

Domestic and international investors have already given their response after several central banks, including the Reserve Bank of Australia, raised their key rates, selling down global share markets sharply.

The Australian share market looks set for another session in the red on Monday after Wall Street finished lower on Friday after a wildly fluctuating session on concerns the US Federal Reserve will raise interest rates sharply in coming months.

The S&P 500 slid 23.53 points or 0.6 per cent to a nearly one-year closing low of 4,123.34 and the Dow Jones Industrial Average fell 98.60 points or 0.3 per cent to a two-month closing low of 32,899.37.

The tech-heavy Nasdaq tumbled 173.03 points or 1.4 per cent to 12,144.66, once again hitting its lowest closing level in well over a year.

Australian share futures were down 51 points or 0.7 per cent at 7107 in sympathy.

On Friday the Australian share market suffered its worst session in 10 weeks, ending down 159.1 points, or 2.2 per cent, to 7205.6.

Last week the Federal Reserve raised its key rate by its biggest margin in 22 years and the Bank of England, while lifting its key rate, warned of 10 per cent UK inflation and the risk of recession.

The RBA also increased the cash rate to 0.35 per cent from 0.1 per cent, the first rise in over a decade, while jacking up its inflation forecast for this year to six per cent, almost double what it had expected in February.

Economists are already braced for a further rise of as much as 0.5 percentage points at the RBA's June board meeting given the central bank's clear indication it will do what it takes to curb inflation.

"This signals an aggressive profile for interest rates over the next six to 12 months," AMP senior economist Diana Mousina said.

She expects a rate hike of 0.4 percentage points in June and a cash rate of between 1.5-2.0 per cent at the end of this year and 2.0-2.5 per cent by mid-2023.

Consumer confidence - a guide to future household spending - has been on the back foot in recent weeks, faced with ballooning inflation, and particularly rising petrol prices.

The weekly ANZ-Roy Morgan consumer confidence index is released on Tuesday and will capture the fallout from the RBA's rate rise.

The National Australia Bank will also release its influential monthly business survey on Tuesday, while the broader Westpac-Melbourne Institute consumer sentiment survey is issued on Wednesday.

Meanwhile, the Australian Bureau of Statistics will release retail sales figures for the March quarter on Tuesday.

Economists' forecasts point to a one per cent rise in the quarter after the 8.2 per cent surge in the December quarter, which was the result of a strong rebound from the COVID-19 Delta variant lockdowns.

Ahead of crucial wage growth and labour force figures due on May 18 and 19, the ABS will provide an update on the employment market with its payroll jobs data for the fortnight to April 16 on Thursday.

The week kicks off with the Australian Institute of Petroleum's weekly prices report on Monday.

Its previous report showed petrol prices had risen for two weeks in a row as global factors outweighed the government's efforts to contain costs by halving fuel excise.

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