Australia: Consumer confidence picks up slightly in October
October 12, 2011
In October, the index of consumer sentiment, published by Westpac and the Melbourne Institute, inched up to 97.2 points, which was only 0.3 points above the 96.9 points recorded in September but nonetheless marked a second consecutive month of improving sentiment. Despite the increase, the index idled below the long-term average of 100 points for a fourth consecutive month. According to Westpac and the Melbourne Institute, the result reflects contrasting downside and upside signals. On the one hand, uncertainty in the financial markets and the drop in the value of the Australian dollar (AUD) had a negative impact on household sentiment. On the other hand, the Central Bank's increasingly dovish stance towards future interest rate increases proved to be a positive note for Australian consumers. Most sub-components of the index showed modest gains in October. The component that rose most notably was the one related to the economic situation in the next 5 years. That said, while households' expectations regarding their future personal financial situation improved, consumers' willingness to purchase a major household item dropped by 5.6% over the previous month's survey. Westpac and the Melbourne Institute believe that the latter result stems from the AUD's moderation, proving that the continued improvement in the attitude towards major purchases in recent months reflected ?strong affordability associated with the strong currency? rather than an actual intention to buy.
Author: Armando Ciccarelli, Head of Data Solutions