Australia: Consumer Sentiment falls in response to market turmoil - Westpac

Bill Evans, Research Analyst at Westpac, notes that the Australia’s Westpac Melbourne Institute Index of Consumer Sentiment fell by 2.3% to 102.7 in February from 105.1 in January.

Key Quotes

“The survey was conducted over the week of February 5 – February 11. That week was marked by a wave of volatility in global share markets. The Australian market, which was more stable than most, still experienced some significant swings, being down a net 4.6% for the week while the US market (S&P 500) was down by a net 7.2%.”

“Extensive media coverage of these developments would have unnerved respondents on two fronts – the impact on their own financial position and concerns for general global stability.”

“These concerns appear to have been acutely felt by retirees whose confidence fell by 13.5%.”

“In those circumstances the 2.3% fall in the Index is a decent result and is now registering a fourth consecutive month where optimists outnumber pessimists. Recall that this sequence follows 12 consecutive months where pessimists were in the ascendency for all but one month.”

“Having said that the level of the Index is still well below levels typically associated with a robust consumer.”

“Developments in the components of the Index are consistent with the likely impact from last week’s market volatility. In particular respondents’ assessments of their own finances suffered, the ‘finances vs a year ago’ sub-index fell by 4.5%; and the ‘finances, next 12 months’ sub-index fell by 3.1%. We assume that these components have suffered temporary set- backs associated with market volatility. On face value the ‘year ago’ component is sending a very weak signal about likely spending prospects.”

“Not surprisingly the ‘economic conditions, next 12 months’ component fell sharply by 4.7% while the ‘economic conditions, next 5 years’ component was stable.”