The Westpac Consumer Sentiment Index for September fell 5.6% to 93.6 points, down from 99.5 points in August. Most components of the index decreased in September including confidence about the global and local economy or the housing market.
Westpac’s Chief Economist, Bill Evans, believes the fall was most likely a normal correction after upbeat sentiment last month. He commented on the results: “This solid fall in the Index comes as no surprise. We were somewhat puzzled by the surprise increase in the Index last month of 7.8% and there was always likely to be some correction this month.”
As for fundamental reasons, Mr Evans says negative sentiment was caused by last month’s global equity selloff, poor economic data from China, weak domestic growth rates as well as the fall in the Australian Dollar.
Falling consumer sentiment has emerged as a medium-term trend as the index remained below a reading of 100 in 17 out of 19 months. The 100 point mark is the level at which the number of pessimists and optimists is equal, hence a reading below 100 indicates that there are more pessimists than optimists. The average reading of the past year is around 96, reflecting the negative mood of consumers.
As a result of the survey, Westpac came to the conclusion that weak domestic and overseas economic conditions were concerning consumers the most, ahead of ‘Budget and taxation’ or the Australian dollar. Fears about the world economy have even negatively impacted personal matters such as ‘family finances’ or ‘unemployment expectations’.
Westpac-Melbourne Institute Consumer Sentiment Index also stated that “confidence around the housing market continues to erode”. Even though more participants believe that house prices will continue to rise, the expectation firms that it will occur at a slower rate. The sub-index fell 17% year-on-year.
Westpac Chief Economist Bill Evans also commented on Westpac’s expectation of further interest rate cuts saying that “we expect the Board will maintain its steady rates policy for the remainder of this year and throughout 2016.”
Author: Imran Valibhoy
Sep 09, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.