Australia: Consumer sentiment dips in November
November 15, 2017
The Westpac-Melbourne Institute Index of Consumer Sentiment dropped from 101.4 in October to 99.7 in November. As a result, the index fell back below the crucial 100 mark which separates optimism from pessimism among consumers. October’s figure had marked the first move into positive territory since November last year, but the index was unable to maintain this momentum.
The fall was likely due in part to households’ concerns over the potential for interest rates to rise; consumers with a mortgage grew markedly less optimistic than those without. This is despite the Reserve Bank of Australia recently downgrading its inflation forecasts for 2018 and 2019 in its most recent monetary policy statement. Uncertainty from the citizenship scandal currently engulfing parliament also had a role to play in the decline; consumers grew less optimistic regarding economic conditions over the next 12 months and the economic outlook for the next five years. In addition, consumers grew less willing to make big-ticket purchases, which chimes with recent limp retail sales figures. They became more upbeat regarding their personal finances, both over the next 12 months and compared to the same period in the prior year. However, the latter two indicators are still running below their respective long-run averages, likely indicative of still-meager wage growth.
Author: Oliver Reynolds, Economist