No boost for spending intentions.
The Westpac Melbourne Institute Index of Consumer Sentiment rose 2.8% in November, recovering from the mild setback in the September quarter.
“This is a surprisingly strong result. In particular, respondents are much more positive about their own finances, but on a more cautionary note, measures of spending intentions have been weaker,” according to Westpac chief economist, Bill Evans.
Four of the five index components also recorded gains in November with assessments of family finances showing a promising rise and the ‘finances next 12 months’ sub-index rising 3.2%.
Consumers in NSW showed particularly strong gains, a somewhat surprising result given the continued correction in Sydney house prices, Evans said. However, while the wider consumer mood is more buoyant, attitudes towards spending are more downbeat with the ‘time to buy a major household item’ sub-index falling 3.5% in November, to an 18 month low.
“Responses to our annual question on Christmas spending plans also point to a subdued near term outlook for demand. A third of Australians expect to spend less on gifts than they did last year, with 56% expecting to spend about the same and just 10% expecting to spend more. The net balance of ‘more minus less’ is marginally more negative than last year, and the weakest read since 2014. Despite the higher reads in overall confidence this question suggests that we are unlikely to see any improvement over last year’s lacklustre Christmas spend,” he said.
There were also interesting consumer views around housing. Buyer sentiment improved sharply with the ‘time to buy a dwelling’ index posting a strong 11.8% surge, up 16.7% on a year ago, its highest level since March 2015.
Consumers in NSW showed a particularly strong gain with a 26% jump taking the state index to a five year high, suggesting the decline in Sydney house prices is starting to generate some interest from buyers. “Because the NSW index has been so low this stunning improvement only restores the index to just below its long term average,” Evans said. The other state, Victoria, where prices have recently shown significant weakness, improved modestly with ‘time to buy’ up only 3.3%.