Australia: Consumer confidence plunges in January
January 19, 2011
Consumer confidence plunged in January, in the wake of the severe flooding which affected the country, most severely in Queensland, but also in Victoria. The index of consumer sentiment, published by Westpac and the Melbourne Institute, dropped from 111.0 points in December to 104.6 points in January. At the current level, the index remains above the long-term average level of 100 points but is now at its lowest level since June 2010. The negative impact of the floods on Queensland consumers was clearly evident. However, an analysis of the survey excluding answers from households in Queensland also shows consumer sentiment deteriorating. The index excluding Queensland fell 3.2%, while the total index dropped 5.7%. According to Westpac and the Melbourne Institute, the result likely reflects worries regarding the consequences of the floods on the national economy and on the financial situation of those households living in the states and major cities not affected by the floods. The monthly decline was driven by a strong deterioration in the short-term outlook (12 months) regarding the general economy, which plunged 15.7% over December. On the other hand, the five-year outlook improved slightly, increasing 0.2%. Meanwhile, the evaluation of households' personal financial situation compared to the previous year fell 2.1%, while the outlook for the next 12 months dropped 5.6%. Reflecting the deterioration in their financial outlook, households are less likely to buy a major household item and the sub-index relative to this component dropped 3.9%.
Author: Armando Ciccarelli, Head of Data Solutions