The Westpac-Melbourne Institute Index of consumer sentiment rose 2.9% in October, but rate rise concerns have resurfaced.
Westpac senior economist, Matthew Hassan said while the consumer mood has improved slightly optimism remains in extremely short supply and the latest index read remains in pessimistic territory. “This is consistent with a continuation of the contraction in per capita spending seen since late last year,” he said.
“While there are some faint glimmers of hope around family finances and the outlook for jobs, these are being overshadowed by still-high inflation and renewed rate rise concerns.”
However, the most promising shift in consumer confidence has come from the ‘time to buy a major household item’ sub-index that surged 7.6% in October, but it came with a cautionary note. “Buyer attitudes have been markedly weaker over the last year compared with previous economic cycles and look to be capturing the direct effects of higher prices,” Hassan said. “If sustained, the lift may be signalling that the inflation situation for consumers is starting to improve, but that is a very big ‘if’”.
The component sub-indexes were again a mixed bag in the month, with family finances still clearly under intense pressure despite a marginal improvement, and consumers remain less upbeat about near-term prospects for the economy.
“The ‘time to buy a dwelling’ index posted a 4.8% rise in October but is at extremely low levels by historical standards,” he said. “The state breakdown shows much stronger improvements in Queensland and Western Australia, up 13.6% and 29% respectively.”