Consumer sentiment rebounds 4.2%m/m in Australia

Consumer sentiment rebounds 4.2%m/m in Australia in September

Consumer sentiment rose 4.2%m/m in September (JPMorgan 2.0%) after slumping 8.1% in the previous month. The Westpac-Melbourne Institute index of consumer sentiment rose from 111.1 in August to 115.7 in September, sitting comfortably above a reading of 100 - a neutral level where the number of optimists equals the number of pessimists. That said, the index remains well below the 123.9 record high touched in May.

Confidence rebounded in September owing mainly to the RBA's decision to leave interest rates on hold, although persistently tight labour market conditions, and a mild easing in petrol prices, also lifted sentiment. On the downside, however, global financial market volatility, record low housing affordability, and uncertainties surrounding the outcome of the forthcoming election prevented confidence rising even further. With respect to the latter, confidence amongst Labor opposition voters surged by 9%m/m in September, in comparison to a mere 1.7% rise in sentiment among voters supporting the Coalition government, according to the Westpac-Melbourne Institute report.

All components of the index increased from a month-ago in September. The outlook for economic conditions in the year ahead posted the largest rise, surging 7.3%, followed closely behind by sentiment toward family finances compared to a year ago (+7.0%.) and the outlook for economic conditions over the next five years (+6.0%). Only a mild improvement was recorded in the outlook for family finances over the next year (+0.8%) and sentiment toward buying major household items (+0.6%). Meanwhile, sentiment toward current conditions rose a healthy 3.4%, while future expectations rose 4.7%.

Despite the rebound in confidence in September, consumers will tread cautiously in coming months. The uncertain outcome of the forthcoming election will remain a concern, alongside the risk that the recent surge in money market rates will be passed onto consumers in the form of higher borrowing costs. Many borrowers are already battling with deteriorating levels of housing affordability and rising levels of debt relative to their disposable incomes.

- Consumer sentiment rose 4.2%m/m in September after falling 8.1% in August.

- All components of the index increased, although sentiment toward the outlook for economic conditions a year ahead posted the largest rise (+7.3%m/m).

ENDS

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