Australia: Consumer sentiment dives into pessimistic territory in January
The Westpac-Melbourne Institute consumer sentiment index fell from 104.4 in December to 99.6 in January. Therefore, it moved below the 100-point mark that separates optimism from pessimism among consumers for the first time in over one year.
January’s drop was the result of a broad-based deterioration in the sub-components of the index. Consumers’ assessments of their personal finances compared to a year ago as well as their expectations of their finances in the next 12 months worsened significantly, likely due to disappointing wage growth and a high stock of debt. Consequently, respondents’ propensity to purchase major household also weakened. Moreover, expectations of economic conditions in the next five years became gloomier, while the general economic outlook on the next 12 months deteriorated sharply. Nevertheless, both sub-components concerning the overall economy remained above their long-run averages. That said, the number of consumers expecting unemployment to increase in the year ahead rose. However, consumers were more likely to buy a dwelling and expected further house price corrections.