Consumers remain pessimistic about the Australian economy for the eighth consecutive month, but it isn’t as bad as it seems.
Even though October marks the eighth month that the Westpac Melbourne Institute of Consumer Sentiment scored below 100 – which indicates that pessimists outnumbered optimists – it isn’t all bad news.
Bill Evans, chief economist at Westpac says the index rose by 0.9% from 94.0 in September to 94.8 in October.
“The current reading for the index is 1.2% below the average for those eight months indicating that while the index seems to be ‘stuck’ in a pessimistic range there is no sign, at this stage, of ongoing deterioration.
“Although we are observing this ongoing pessimism the result of this particular month is probably better than might have been expected given the violent moves in global financial markets that might have further unnerved respondents.”
Consumers’ attitudes towards purchasing property improved in October, with the component “whether now is a good time to purchase a dwelling” increasing by 2.3%. However, sentiment is still 12.4% below its level of a year ago and 18.5% below its level two years ago.
The index did see some caution emerge around the outlook for house prices. The Westpac Melbourne Institute House Price Expectations Index fell by 11.2% in October, now sitting at 12.8% below its level of a year ago. The proportion of respondents expecting house prices to rise fell from 66% to 53.8%.
Consumers have been encouraged by recent announcements that a number of budget initiatives have been set aside for the time being; it is the global economic outlook that mainly has Aussie consumers unnerved.
According to the index, family finance components as a whole are down by an average of 5.6% from a year ago, whereas the overall economic outlook components are down by an average of 21% compared to a year ago.