Just as retailers and consumers alike gear up for what they hope to be a good Christmas, the Westpac Melbourne Institute Index of Consumer Sentiment shows there was a fall in consumer confidence from November to December.
The Index fell by 4.8 per cent from 110.3 points in November to 105 points in December.
Westpac chief economist Bill Evans believes the drop shows confidence is starting to level out with the boost in the three months previous was associated with the election results and booming house prices.
Four of the five components of the Consumer Sentiment Index were down in December, including consumer expectation in unemployment and economic outlook.
There was also a 2.3 per cent fall in the component tracking views on whether ‘now is a good time to buy a major household item’. Similarly, the responses to the question on whether now is a good ‘time to buy a dwelling’ fell by 4.2 per cent in December to be down by 10.5 per cent from its September peak.
But there was no clear indication around the respondents’ savings preferences.
“On the one hand we saw a move toward more risk,” Evans said.
“The proportion of respondents who favoured equities as the wisest place for savings increased by 2.8ppts to 11.6 per cent – the highest proportion since March 2011.
“There was also a much less conservative attitude toward debt: the proportion of respondents nominating ‘pay down debt’ as the preferred option fell by 2.4ppts to 11.3 per cent, down from 26.6 per cent in December 2011 and the lowest reading since June 2007.
“On the other hand there was an increase in the proportion of respondents favouring bank deposits from 29.3 per cent in September to 32.6 per cent in December.”
From this, Westpac has forecasted there will be another 0.25 per cent rate cut in February when the Reserve Bank meets next, Evans said.