Pessimists back in charge as weak growth sinks consumer confidenceMarch 13, 2019
Pessimism has returned as the dominant emotion among consumers, further highlighting the current fragile nature of the economy.
- Consumer sentiment has hit its lowest ebb in six months
- Consumers’ views on the economic outlook and family finances suffered the steepest decline in March
- It follows a fall in business sentiment, with both surveys seen as a good barometers of future economic performance
The Westpac-Melbourne Institute consumer survey found confidence fell almost 5 per cent this month.
The confidence index again shifted below the 100 level which divides net optimism from pessimism — the higher the number, the more optimistic consumers are.
The survey was conducted earlier this month either side of the release of fourth quarter GDP data that showed the economy had slowed sharply in the second half of 2018 to an annual pace of just 1 per cent growth.
The most recent reading confirmed two consecutive quarters where economic expansion failed to keep up with population growth, which many economists have dubbed a “per capita recession”.
Westpac’s Matthew Hassan said the news had a noticeable impact on sentiment.
“Those collected before the March 6 release had a combined index read of 100.7. Those collected after the release had a combined read of 92.7, an 8 per cent fall.”
The weak consumer reading follows a similar slide in business confidence and conditions in the most recent NAB survey.
Both consumer and business readings are considered solid indicators of future economic performance.
Mr Hassan said all index components recorded falls in March but the biggest shift was in consumers’ near term expectations for the economy.
“With the December quarter national accounts likely clarifying what were previously somewhat mixed signals about the extent of Australia’s growth slowdown, the March weakening in consumer expectations for the economy looks likely to be sustained.”
A reading below 100 indicates pessimists outnumber optimists (Supplied: Westpac, Melbourne Institute)
Housing downturn bites
Mr Hassan said the housing market downturn — a key factor in the disappointing December quarter growth figures — also looks to have had a more direct impact on sentiment.
“Consumers in Sydney, which has seen the largest house price declines over the last 18 months, recorded a sharp 10 per cent fall in sentiment.
“Those working as labourers or operators also recorded a particularly sharp 14 per cent decline, likely reflecting the significant weakening in dwelling construction.”
However, the housing correction and subsequent improvement in affordability has seen the ‘time to buy a dwelling’ index rise to a four-year high.
The time-to-buy index has now risen by 30 per cent since its low point two years ago when prices were still surging in Sydney and…