After last week saying the result of the consumer sentiment survey, which fell 5.7% to 96.6, Westpac’s chief economist Bill Evans has summarised the consumer mood as “Grinched”.
The news for retailers is that fall in Westpac’s composite index paints a really bad picture for the level of spending in the economy over the next six months and a likely weaker than expected Christmas spend.
In his monthly look at the minutiae of the consumer mood, Evans summed up the situation, saying his composite indicator of spending six months ahead, the CSI, also fell heavily during the month down 5.6% to 88.4, “well below the long run average of 103.3”.
The CSI combines sub-indexes on “family finances” and “time to buy a major item” with the Westpac Risk Aversion Index.
Current levels of the CSI point to per capita spending falling at about –1%yr, implying growth of just over 0.5%yr in aggregate consumer spending (i.e. allowing for rising population).
That would mark a significant further slowdown from an already subdued spending picture. The Q3 national accounts showed total consumption up 0.5% qtr, 2.5% yr. The result was a touch softer than expected, although revisions lifted the annual growth rate slightly above the 2.3% we were expecting, and slightly above the 1.5-2% pace predicted by previous CSI reads.
The spending detail showed notable declines for food (–0.5%), cigarettes & tobacco (–2.2%), vehicles (–1.4%) and insurance & other financial services (–0.3%).