In the midst of the peak retail period for the year, the news that consumer sentiment has fallen for the ninth straight month could not come at a worse time.
The Westpac-Melbourne Institute Consumer Sentiment Index fell 5.7% in December from
96.6 in November to 91.1 in December. Spending attitudes are not roughly on par with those of a recession.
Westpac’s Chief Economist, Bill Evans, commented yesterday that the result was “very disturbing result”.
“The Index is now at its lowest level since August 2011 when it briefly fell below 90. Prior to that you have to go all the way back May 2009 to see a period when the Index printed consistently below today’s level,” Mr Evans said.
“Respondents are clearly concerned about the outlook for the economy and job security. In
addition there is ongoing disillusionment about the May Budget, six months after it was
announced.”
The survey provides periodic updates on specific categories which affect Australians, and respondents assess them as favourable or unfavourable.
The most recalled news topics were: ‘economic conditions’ (59.2% of respondents); ‘budget and taxation’ (52.7%); ‘international conditions’ (26.3%) and ‘employment’ (19.5%). In each category, respondents assessed the news to be extremely unfavourable.
“These readings are almost certainly an overreaction but do highlight significant risks to spending, particularly over the course of the next few months,” Mr Evans said.
Similarly, a spokesperson from ME Bank is unsurprised by the steep fall in consumer sentiment. The trend aligned with a recent analysis of Christmas spending which found that the use of credit cards is expected to fall this Christmas as money pressures keep exuberance in check.
“According to ME Bank’s most recent Household Financial Comfort Report a lack of cash savings has emerged as one of the biggest areas of concern amongst Australian households this year. Over half report being unable to save each month, the highest in three years,” the spokesperson said.
“Overall income and consumer sentiment has been negatively impacted by relatively low average wage growth, moderate job gains, rising unemployment and corresponding falls in job security over the period, as well as an anticipated tightening in government income assistance and tax benefits announced in the Federal Budget.”
