Perhaps Australians aren’t as confident as we first though in early 2017.
Only a day after learning that consumer confidence remained near multi-year highs in the separate ANZ-Roy Morgan survey, the latest Westpac-MI consumer sentiment survey for January paints a very different picture on the mindset of Australians.
It was weak, and largely driven by concern about our family finances.
At 97.4, the survey’s headline sentiment was almost unchanged from December, remaining below the 100 level indicating that pessimists outnumber optimists right now.
The table below from Westpac shows the internal movements with the survey’s various components, looking at the change from December as well as over the past year.
Perceptions towards current family finances was perhaps the most noteworthy movement, sliding by a further 7.6% having dipped by 2% in December.
It has now fallen by 16% from its peak in 2016, and may have been impacted by the recent spike in fuel prices following OPEC’s deal to cut global crude output in the first half of 2017 that was announced in late November.
A recent lift in fixed home-loan rates — in line with those seen in global markets — could also have been a factor.
However, despite the slide in perceptions towards current family finances — something that is often watched to determine likely household spending patterns in the months ahead — that didn’t impact sentiment as to whether now was a good time to buy a major household item which jumped 4.9%, recovering from the 7% plunge recorded previously.
Elliot Clarke, senior economist at Westpac, called the result “disappointing” given recent gains in Australian stocks and labour market.
“The absence of a rebound in January is a disappointing result, particularly when one factors in the cumulative 10% gain for Australian equities over the past two months and, to a lesser extent, a nascent improvement in the pace of job creation,” he said.
He also noted that “December and January were the weakest outcomes since April 2016, when the index printed at 95.1.”
Clarke suggests that lingering effects from Australia’s weak GDP report for the September quarter may have contributed the result.
Outside of sentiment towards the economy and family finances, views on the labour market improved fractionally with the unemployment expectations index falling 0.8% in January.
A lower reading indicates that consumers expect unemployment to fall, with the index now down 12% from the recent cyclical peak struck in September 2015.
However, it still remains elevated compared to historic norms, something Clarke suggests shows “a lingering degree of apprehension over job prospects”.
Despite the disappointing January result, Westpac retains the view that the Reserve Bank of Australia will not cut interest rates further.
“While the 0.5% contraction in the Australian economy in the September quarter would have come as a surprise and that result has undoubtedly had a lasting impact on Consumer Sentiment, we expect the Board will be more confident about the economic outlook for 2017,” says Clarke.
“A boost to the terms of trade from higher commodity prices, sustained strong conditions in the major housing markets, still positive forward indicators for jobs, a stronger global outlook; a boost to resources exports and a significantly reduced drag from mining investment point to the Australian economy’s growth rate lifting from the current 1.8% to 3.0% in 2017, precluding any need for further rate cuts.”