Westpac and the Melbourne Institute have just released the January Consumer Sentiment survey which fell 1.7% after last month’s big 4.8% fall.
The index is now at its lowest level since mid 2013 but Westpac Chief Economist Bill Evans said in a note accompanying the release that “the Index remains comfortably in the zone where optimists outnumber pessimists.”
All of the sub-components of the index fell with family finances a year ago and a year hence both down 2.4% and 2.5% respectively. Interestingly the outlook for the economy 12 months and 5 years also fell 0.5% and a whopping 3.2% respectively while “time to buy a major household item” dropped 0.3% although it’s up 2.4% over the past 12 months.
The survey was taken before last week’s shock employment report which showed 22,600 jobs were lost in December. But it seems that survey respondents were already feeling unsettled about employment because the “Westpac Melbourne Institute Index of Unemployment Expectations increased by 0.7% following a 4.6% jump in December.” Increases are bad news because higher expectations mean that respondents expect more job losses in the year ahead.
As Bill Evans noted the optimists still outweigh the pessimists but Westpac still expects that rates will be lowered eventually. Evans said:
Evidence from this survey that households are losing a little confidence; the labour market remains very difficult; and the confidence boost around housing may be peaking is all consistent with the eventual need for further relief.