Consumer sentiment 'deepens slightly': Westpac survey
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The news: Pessimistic consumer sentiment that has persisted for over two years in Australia "shows no real signs of lifting", according to the Westpac Melbourne Institute Consumer Sentiment Index.
The numbers: The index dipped 0.5% to 84.6 in September from 85 in August. A ‘neutral’ level is a reading of 100, meaning pessimists outnumbered optimists by over 15 percentage points.
On the positive side, the survey found sustained improvement in responses on family finances, as inflation moderates and tax cuts and fiscal support measures come into effect. The ‘family finances vs a year ago’ sub-index rose a further 1.2% in September to be up 13.1% since July.
Consumers are also becoming slightly more confident that pressures on family finances will subside, the report said. The 'family finances, next 12 months’ sub-index ticked up 0.2% in the month to be up 5.3% since July. At 97, the sub-index is now close to neutral, suggesting that most consumers expect the cost-of-living crisis to be largely resolved by this time next year.
However, the ‘time to buy a major household item’ sub-index, the component most impacted by the decline in purchasing power over the last two years, was unchanged at 82.6 in September, well below its long run average of 124.2.
The small improvements around family finances were more than offset by a loss of confidence around the economy. The ‘economic outlook, next 12 months’ sub-index fell 2.6% to 81.2 and the ‘economic outlook, next five years’ sub-index declined 1% to 90.6.
The unemployment expectations Index rose 3.7% to 138.4 in September, up 11% since April and is now materially above its long run average of 129.
The deterioration has been sharper amongst consumers with a job — unemployment expectations across this sub-group jumped 8.3% in the month to its highest level since 2016, excluding the COVID period.
Meanwhile, the mortgage rate expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, declined 8.6% to 123.8, marking the lowest read since April.
Responses show just under half of consumers expect mortgage rates to rise over the year ahead, down from over two thirds back in July. Housing-related sentiment continues to show a mix of weak buyer sentiment and upbeat price expectations but with widening variations across states.
The ‘time to buy a dwelling’ index rose 6.6% overall to 76.1. However, state moves varied widely with gains in New South Wales (19.4%) and Victoria (9.9%) contrasting with marked declines in Queensland (-17.9%) and Western Australia (-6.4%).
The overall level of buyer sentiment is still deeply pessimistic compared to the long run national average of 117.
The context: The headline Consumer Sentiment Index is a composite measure based on five sub-indexes that showed a mix of pressures in September, albeit with mostly small moves either way.
What they said: "The pessimism that has dominated for over two years now is still showing no real signs of lifting," wrote Matthew Hassan, head of Australian macro-forecasting at Westpac.
"However, the focus does look to be shifting.
"While cost-of-living pressures are becoming a little less intense and fears of further interest rate rises have eased, consumers are becoming more concerned about where the economy may be headed and what this could mean for jobs."
