This indicator doesn't bode well for Australia's retail sector ahead of the Christmas shopping season

Customers wait to buy their new products at the Australian release of the latest iPhone models in Sydney. (James D. Morgan / Getty Images)
  • Westpac’s monthly gauge of Australian consumers showed optimists outnumbered pessimists for the 12th straight month.
  • However, the percentage of respondents who plan to spend less money over Christmas rose to the highest level since 2014.

Westpac’s monthly survey of consumer confidence was unexpectedly strong today, punctuated by an “exceptional rise” in expectations about the broader economy.

The results showed optimists outnumered pessimists for the 12th straight month, and follows a positive reading for ANZ’s weekly gauge yesterday.

So policy makers and analysts make take some heart from the fact that Australia households remain resilient despite high debt levels and falling house prices.

However, Westpac’s chief economist Bill Evans noted that “attitudes to spending remain downbeat” — a trend which won’t provide any comfort to Australia’s embattled retail sector.

And in the near-term, it doesn’t look like this year’s Christmas season will set the platform for a reversal of fortunes.

Every November, Westpac asks respondents in its consumer survey to provide an update on their Christmas spending plans.

Just over half (56%) of those surveyed expect to spend the same amount as they did last year, while only 10% plan to spend more.

Which means one third (34%) are tightening the purse strings and plan to spend less than they did in 2017.

“The net balance of ‘more minus less’ is marginally more negative than last year, and the weakest read since 2014,” Evans said.

So despite the positive trend in broader confidence levels, “we are unlikely to see any improvement over last year’s lacklustre Christmas spend”.

Today’s data follows research this week from Morgan Stanley, which said falling house prices and political uncertainty could weigh on spending patterns over Christmas.

Retailers also have to deal the increasing popularity of Click Frenzy and Black Friday online sales promotions and competition from Amazon.

In view of that, it’s perhaps no suprise that yesterday’s NAB business survey showed conditions in the retail sector continue to lag every other major industry by a considerable margin.

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