CONSUMERS PESSIMISTIC ENTERING 2017

CONSUMERS PESSIMISTIC ENTERING 2017

CONSUMER confidence remains at its weakest point since April 2016, according to the latest Westpac Melbourne Institute Index of Consumer Sentiment, despite low interest rates and rising equity prices in the lead up to the New Year.

The index rose by just 0.1% in January, from 97.3 in December to 97.4, failing to make up for the 3.9 per cent decline in December.

"December and January are the weakest outcomes since April 2016, when the Index printed at 95.1," says Clarke.

"The absence of a rebound in January is a disappointing result, particularly when one factors in the cumulative 10% gain for Australian equities over the past two months and, to a lesser extent, a nascent improvement in the pace of job creation.

The sub-components of the Index were volatile during January.

Longer-term expectations deteriorated further, as the 'economic conditions, next 5 years' sub-component fell a further 1.4% in January following the 2.5% fall in December.

Views on family finances are also mixed.

'Expectations of family finances over the next 12 months' lifted by 0.3% in January and is down by 3.7 per cent since last year's peak in August.

"A 4.9% rebound in January followed December's 7% decline. At 120.4, this sub-component is only marginally below its post-Budget average of 122.3."



"Unemployment expectations have now fallen by 6% since their 2016 high in March and by nearly 12% since their most recent peak, September 2015.

The 'time to buy a dwelling' index fell 2% in January to be back near its most recent low of November 2016, leaving the around 6% above its 2016 low, reached in April, around 16 per cent below its historic average.

"NSW again led the charge in January. However, material gains were seen in house price expectations across the nation. For all states except WA, price expectations are above their respective long-run averages," says Clarke.

"While the 0.5% contraction in the Australian economy in the September quarter would have come as a surprise and that result has undoubtedly had a lasting impact on Consumer Sentiment, we expect the Board will be more confident about the economic outlook for 2017."



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