The Westpac Melbourne Institute consumer sentiment index is out and even though it rose 0.9% to 94, Westpac Chief Economist Bill Evans said that, this “is the eighth consecutive month that the index has printed below 100, indicating that pessimists have outnumbered optimists” but Evans also highlighted that, “while the index seems to be “stuck” in a pessimistic range there is no sign, at this stage, of ongoing deterioration.”
That in itself is good news and like the ANZ weekly consumer confidence data we saw yesterday, consumers view of their family finances has improved with Evans noting that “the component ‘family finances vs a year ago’ increased by 4.4% while ‘family finances next 12 months’ improved by 1.2%.”
The big question is whether this improved financial situation is going to lead to more spending as it has in the past or rather that this view of family finances is a result of subdued spending and more savings improving household balance sheets.
It is the big question for the economy, but numbers below 100 for this index suggest that spending will remain contained.
Interestingly, and important for how households feel about their wealth, for finances and spending in the months and quarters ahead the survey shows that “confidence around housing remains fragmented,” Evans said. The question “whether now is a good time to purchase a dwelling” was up 2.3% from 111.3 to 113.9 but there is more caution around prices with the “Westpac Melbourne Institute House Price Expectations Index fell by 11.2% in October to now be 12.8% below its level of a year ago.”
On balance this survey paints a picture of an economy still waiting for the impetus to make the transition. It’s not weak per se but neither is it strong.
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