Consumer confidence ‘evaporated’ over Christmas, Westpac says


Posted

January 16, 2019 11:43:51

Australians have started the year in a dour mood, with Westpac’s widely watched consumer sentiment index posting its biggest monthly fall in more than three years to drop into negative territory.

The index plunged from 104.4 in December to 99.6 per cent in January — a reading below 100 indicates that there are more pessimists than optimists.

Westpac’s Matthew Hassan said it is the first sub-100 reading since November last year.

“The ‘cautiously optimistic’ consumer mood that prevailed through 2018 has evaporated with sentiment beginning the new year with a slightly pessimistic view,” he wrote in the report.

“Confidence has come under pressure from a number of fronts, including a continued slide in house prices, disappointing updates on Australia’s economic growth, ongoing concerns around global trade wars, and political uncertainty.

“Indeed, the continued optimism late last year was something of a surprise, implying the consumer mood was still getting considerable support from low interest rates, diminished fears of rate increases, a firm labour market, and at the margin, lower petrol prices.”

Mr Hassan said that confidence usually dips early in the new year, but is down 5.3 per cent on this time last year.

He added that growing pessimism about both the economy and family finances contributed to the slide in confidence, although consumer views about Australia’s economic prospects remain reasonably solid.

“The ‘economic outlook, next 12 months’ sub-index dropped 7.8 per cent, the biggest fall since September 2015 when sentiment was hit by a sharp sell-off in financial markets and a disappointing update on Australia’s growth,” Mr Hassan observed.

“The ‘economic outlook, next 5 years’ sub-index also showed a sizeable 5.9 per cent decline.”

However, Mr Hassan noted that views on family finances fell further below long-term averages.

“Slow wages growth and falling house prices remain significant headwinds,” he said.

While the ‘time to buy a major household item’ sub-index eased a smaller 1.3 per cent, it too remains below long-term levels, pointing to weak retail spending.

‘Time to buy’ views rising as home prices keep falling

On the property market, consumers are warming to the idea of buying property, although they currently expect the price declines in many cities, including Sydney and Melbourne, to continue.

The ‘time to buy a dwelling’ index rose 4.1 per cent in January and is now at a four-year high, up 7.7 per cent over the past 12 months, but still below its long-term average of 120.

However, most people still expect prices to fall further, with dwelling price expectations at a record low index reading of 95.9 in January, with pessimism concentrated in New South Wales (76) and Victoria (83).

“Price declines are becoming firmly entrenched in expectations in these states with nearly three-quarters of NSW and Victorian consumers expecting prices to be unchanged or lower by this time next year,” Mr Hassan observed.

“This may also delay any demand feed-through from the improvement in buyer sentiment, as those looking to buy will be prepared to take their time in order to get ‘better’, ie lower, prices.”

Mr Hassan said tighter lending restrictions are likely to keep downward pressure on property prices, as even those who think now is a good time to buy may struggle to obtain a loan to finance their purchase.

Topics:

economic-trends,

retail,

consumer-finance,

business-economics-and-finance,

australia



Source link Finance News Australia

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