Except from Westpac Consumer Sentiment Survey
Westpac–Melbourne Institute Consumer Sentiment Survey was a mixed bag. Headline
sentiment posted a solid rise, mainly driven, we suspect, by a more relaxed
outlook for interest rates. Responses to the various ‘time to buy’ questions
were also perkier, particularly for housing.
remains in firmly pessimistic territory overall and aversion to risk is still
Meanwhile a sharp
deterioration in unemployment expectations lends more weight to the view that
consumer demand is entering a cyclical weakening. Indeed, the worsening picture
on job security effectively negates the good news from improved sentiment.
Not only does it
suggest actual labour market conditions are deteriorating, it also points to a
material downturn in discretionary spending and is an additional negative for
already soft housing markets where job loss concerns inhibit demand.
For now we have made
only minor changes to our consumer forecasts, mainly to incorporate stronger
than expected Jun quarter spending estimates from the national accounts and
partial data for Jul. These give a firmer near term picture for consumer demand
but the broad forecast of a material weakening in remains intact.
Looking ahead, steady
rates and a reduced threat of rate rises should continue to allay consumer
fears of rate hikes. But with rising uncertainty around the global economy and
growing signs of weakness in local labour markets, we suspect that steady rates
on their own will not be enough to restore consumer confidence.
We continue to expect
that the next move from the RBA will be rate cuts starting with 25bps in Dec
and culminating in a total reduction of 100bps by Sep 2012.
Australian consumers are
likely to remain badly out of sorts at least until an easing bias is apparent
and most probably until actual rate moves are enacted.
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