The latest Westpac-MI Australian consumer sentiment report has just been released, and like other confidence surveys of late it’s continued to push higher.
In November the headline consumer sentiment gauge jumped 3.9% to 101.7, taking the index to the highest level seen since May. It also signalled that optimists outnumbered pessimists, the first in six months that has occurred.
Three of the surveys five subindices improved over the month, led by an enormous 24.2% increase towards economic expectations in the five years ahead. Sentiment towards the economy in the year ahead rose 5.8%, slightly shading a 4.8% increase in whether now was a good time to buy a major household item.
Having outperformed in October, sentiment towards family finances deteriorated sharply. Expectations for family finance in the year ahead plummeted 9.1%. Compared to a year earlier, sentiment fell by a smaller 2.2%.
Bill Evans, chief economist at Westpac, suggested the November result was a consequence of two strong opposing forces – weak perceptions towards personal finances being overshadowed by improved sentiment towards the economy.
“The components of the index that measure respondents’ assessments of their own finances were down, on average, by 5.7% whereas the components of the index that measure respondents’ expectations for the overall economy increased by an average of 15.0%,” he said.
Evans suggests the decision from the RBA to leave interest rates on hold at its November meeting, something that was seen as an even money call by markets heading into the event, was likely behind the weakness in sentiment towards personal finances. However, on the back of continued optimism over the change in Australia’s political leadership, that was more than offset in improved confidence towards the economy.
Interestingly, the decision by Australia’s largest banks to increase variable mortgage rates, something that many cited as something that would detract from sentiment levels, had little to no impact. Sentiment of those respondents with a mortgage actually bounced 4.1%, larger than the overall index.
Indicating that Australian retailers may enjoy a strong Christmas trading period, Westpac asked respondents whether they expected to spend more, less or about the same on Christmas gifts
compared to last year. 16.9% indicated that they expected to spend more, up on the series average of 12.5%, while 29.6% suggested they will spend less, down on the 34.7% average of the previous six years.
Perhaps buoyed by strong house price growth and a strengthening labour market, Westpac noted that consumers in NSW were particularly upbeat with more planning to increase than cut Christmas spending compared to a year ago.
While there were some pockets of weakness – unemployment expectations edged higher having fallen 13.7% in October while sentiment towards the housing market remained soft – Evans was delighted with the continued uplift in sentiment, calling it “a cracking result.’
“This is a cracking result. Apart from the brief surge we saw following last May’s Budget this is the highest print for the Index since January 2014. The index is now 8.3% higher than in September, immediately preceding the change of leadership in the government.”
“It marks only the third month out of the last twenty one that optimists have outnumbered pessimists.”
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