The Westpac – Melbourne Institute Consumer Sentiment index for October has just been released showing a fall of 2.1% to 108.3.
While it may seem disappointing Westpac says that this is a “solid result” following the 4.6% leap in September. The index is still well above the 100 line and 9.2% above year ago levels.
The chartist in me couldn’t help but draw a trendline on confidence from the highs and this suggests that confidence might have peaked.
This seems to be borne out in the response by consumers to the question about their finances in 12 months time which fell heavily in October compared to September.
In the October survey the 12 month outlook index dropped by a significant 5.5% while the comparison with a year ago improved by 0.7%. In fact both measures are now below their pre-election levels.
This lack of response around people’s assessments of their own finances raises some doubts as to whether the healthy reads of the overall index will spur consumers out of their current spending torpor.
Really interestingly and proof that in the current market where consumers are cautious and have little appetite to increase borrowing and spending, house prices may not make them feel better.
Westpac noted that as a result the question of whether it’s “a good time to buy a dwelling” had some very strong negative reactions.
There were some big falls in individual states – NSW down 22.5% and Queensland down 11%. There was a similarly sharp decline in this Index back in April following media speculation that the next move in interest rates might be up. This month’s decline comes after reports of strong gains in house prices, particularly in Sydney, suggesting that deteriorating affordability and warnings by some commentators of the potential for a price bubble may be driving the shift in sentiment.
This is a result that screams economy-in-transition but the exit point is still some way away. Australia is going to have to rely on mining for a little longer yet.
Follow Greg McKenna on Twitter.