Australia: Consumer sentiment picks up in December

The Westpac-Melbourne Institute Index of Consumer Sentiment increased from 99.7 in November to 103.3 in December. As a result, the index rose back above the crucial 100 mark which separates optimism from pessimism among consumers. This came despite swirling political uncertainty due to the citizenship scandal.

December’s increase was broad-based. Consumers grew more positive regarding their finances compared to a year ago and over the next 12 months, and their future economic conditions. Consumers also became more willing to purchase major household items. Confidence was likely boosted by expectations of slower interest rate rises, and recent talk of possible tax cuts before the 2019 federal elections. However, higher confidence may not necessarily translate into increased spending, as consumers are highly indebted, saving rates are low, and wage growth remains meager.

FocusEconomics Consensus Forecast panelists see private consumption growing 2.3% in 2018 and 2.3% again in 2019.