Households slowly adjusting to high fuel prices - economist

12:55 pm today

File photo.

Photo: Hanna Tornyai / 123rf

Rising fuel prices are weighing on the economy, with the latest ANZ Truckometer pointing to weak demand.

Light traffic - a gauge of future consumer demand - fell 0.2 percent in May and is up just 0.4 percent on a year ago.

ANZ chief economist Sharon Zollner said the index suggested consumers were still driving less and spending more on fuel.

Heavy traffic - a real-time gauge of economic activity - dropped 1.3 percent in the month, though it remained up 1.9 percent annually.

Zollner said the heavy traffic index was more volatile, and despite the fall in May, it was still trending upwards - indicating businesses remain resilient.

She said firms were continuing to show resilience, and recent spending data suggested households were starting to adjust to higher fuel costs.

But she warned uncertainty in the Middle East was likely to limit any rebound, noting headlines from the region were changing daily.

"A few more people have decided to get on with stuff, but obviously anything could happen," Zollner said.

"The situation is still extremely uncertain, and it will weigh on activity."

She said decisions like investing, hiring, or buying large household items required confidence in the future - something that had taken a hit since the conflict began.

Zollner said more recent spending data pointed to a slight recovery in consumer demand, which may reflect falling fuel prices and consumers getting past the initial sticker shock.

She said it remained difficult to assess the full impact of the conflict on second-quarter growth, but there had been a stall in momentum as consumers held back on spending amid the uncertainty.

ANZ still expected the Reserve Bank to lift the official cash rate at each of the next three meetings.

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