Consumer sentiment is ever slowly creeping upwards with the Westpac Melbourne Institute Index of Consumer Sentiment reporting a 0.4 per cent increase in October from 96.9 in September to 97.2.

Westpac chief economist Bill Evans said there has been a number of conflicting signals which explains why sentiment has hardly moved in October.

“On the downside, financial markets were again unsettled with sharp falls in both the sharemarket and the Australian dollar. In the period after the September survey the AUD fell from around 106¢ US to around 94¢ at the beginning of the survey week.

“However, on the positive side we saw a marked change in the rhetoric of the Reserve Bank. After discussing the option of raising interest rates as recently as August the Bank reported that it had adopted an easing bias at its October Board meeting. “

Evans also highlights that the fall in the Australian dollar had a significant impact on sentiment towards buying a major household item, falling by 5.6 per cent.

“We have long been of the view that the ongoing positive sentiment towards major purchases was more reflective of strong affordability associated with the strong currency than an actual intention to buy,” he said.

“All other components of the Index showed modest gains – with the sub-indexes tracking the ‘outlook for economic conditions over the next 12 months’ up 0.9 per cent; the ‘outlook for the economy over the next 5 years’ up 4.1 per cent; ‘the state of family finances relative to a year ago’ up 2.3 per cent; and ‘the state of family finances over the next 12 months’ up 3 per cent. Most of these components would have benefitted from the improved outlook for interest rates.”