Consumer confidence flatlines
The Westpac-Melbounre Institute Index of Consumer Sentiment has fallen 2.5 per cent in the August period, down to 96.6 from 99.1 in July.
Despite continual positive news about the economy over the last month, and generally over the last quarter, consumer sentiment has continued to contract, steadfastly ignoring positive unemployment statistics, which fell to 5.2 per cent, and a steady interest and inflation rate.
The results are the sixth consecutive month that consumer sentiment has registered below the baseline 100 points, averaging 96.2 per cent. The results are uncharacteristic of a non-recession period, given that the only time sentiment has consistently trended below 100 points is over the early 1990s recession and the 2000-01 period.
Westpac’s Chief Economist, Bill Evans, said that media coverage of the RBA’s reluctance to cut the cash rate over the coming sixth months have unsettled already jittery households.
“While the Reserve Bank did not surprise by holding rates steady at its August Board meeting, consumer perceptions of the outlook for interest rates have shifted. Media reports that the Reserve Bank may have decided against future rate cuts are likely to have unnerved households. For example, despite rates staying on hold the confidence of respondents who hold a mortgage fell by 3.9%,” Mr Evans said.
““The print for August indicates that pessimists clearly outnumber optimists. The Index is only 0.6% above the level in March this year which preceded the most recent rate cuts and the cash disbursements.”
Mr Evans also expressed his concern over the retail sectors recent results, saying that the positive results earlier in the year were a result of aggressive marketing and discounting in the industry rather than an overall upswing in in consumer spending.
The Index found that Victoria was the only state to post a boost in confidence, while Queensland recorded the sharpest fall, which Mr Evans attributed to speculation around the forthcoming State Budget.
“The Reserve Bank Board next meets on September 4. We do not expect a rate cut. However, despite current media speculation, we do believe that the case for further cuts is likely to be clear by the December quarter,” Mr Evans concluded.