Australia: Consumer sentiment falls on economic concerns - Westpac

Bill Evans, Chief of Economics at Westpac, notes that the Westpac Melbourne Institute Index of Consumer Sentiment fell by 3.9% in December from 101.3 in November to 97.3 in December.

Key Quotes

“Over the last six months the Index has held in narrow range between 99.1 and 102.4. Over that period the Index has generally held above 100 indicating that optimists have slightly outnumbered pessimists (100 being the cut- off point).”

“However, today’s result has jolted that air of stability and confidence. The Index is now at its lowest level since April this year when it printed 95.1. Note that in May, in response to the Reserve Bank’s decision to cut the overnight cash rate and a better than feared Federal Budget, the Index surged by 8.5% to 103.2 and has remained in that tight range until today.”

“At 97.3 there is now a clear majority of pessimists over optimists with the Index down 3.5% relative to a year ago.”

“It is likely that the key reasons behind this fall in Confidence are related to renewed concerns around the economy; interest rates; and the labour market.”

“Note that this fall in Confidence has occurred despite around a 9% lift in the Australian share market.”