Australia: Consumer confidence remains resilient in December
December 15, 2010
Consumer confidence inched up in December. The index of consumer sentiment, published by Westpac and the Melbourne Institute, rose from 110.7 points recorded in November to 111.0 points in December. At the current level, the index remains well above the long-term average level of 100 points. According to Westpac and the Melbourne Institute, the positive result proves that the impact on households of the Reserve Bank's decision to raise the cash rate by 25 basis points in November is fading away. In fact, the confidence gauge remained buoyant despite increases in the variable mortgage rates offered by most banks in December. At the time of the survey in November, only one bank had lifted its variable mortgage rate. The monthly reading was driven by a more optimistic assessment of consumers' personal financial situation. In particular, the evaluation of their personal financial situation compared to the previous year increased 4.1%, contrasting the 10.2% drop seen in November. Households are also more upbeat regarding their financial situation in the next 12 months, leading to a greater willingness to buy major household items compared to last month. On the downside, respondents to the survey have a more pessimistic outlook regarding the prospects of the general economic situation in the long run (5 years), as this component of the index dropped by 7.2% and is now at its lowest level since February 2009. Finally, despite dismal long-term prospects, households are more upbeat compared to the previous month regarding the general economic situation next year.
Author: Armando Ciccarelli, Head of Data Solutions