The Westpac Melbourne Institute Index of Consumer Sentiment remained almost unchanged, edging 0.1 per cent lower from 102.2 in June to 102.1 in July.
Westpac senior economist Matthew Hassan said given there’s little change and it’s now just over the 100 level it indicates there’s some slight optimism. However, consumer confidence is still significantly weaker than at the start of the year with the Index 7.6 per cent below its March peak.
“The survey detail points to powerful ‘cross-currents’ underlying the stable headline result. Amongst the components of the Consumer Sentiment Index, those tracking views on family finances fell sharply. In particular, the sub-index tracking assessments of ‘family finances versus a year ago’ fell 5.6 per cent to be back near recent lows,” he said.
“In contrast, views on the outlook for the economy improved with the sub-index tracking consumers’ expectations for economic conditions over the next five years surging 9.2% per cent to be well above the average level recorded over the last two years.”
Hassan believes other factors that may have influenced sentiment more generally in July include: the RBA's decision to leave rates on hold at its latest meeting; mixed economic data (lacklustre retail sales but more signs of a housing pick-up); another volatile month for the share market albeit with the ASX up 2 per cent versus the previous survey; and a further rise in petrol prices (average pump price up 7¢ a litre and up 14¢ over the last two months).
“The downgrade in consumers’ assessments of their finances highlights the fragility of sentiment. It is also somewhat concerning given that these components tend to be better predictors of shifts in actual spending. Of similar concern is a downgrade in views on ‘time to buy’,” he said.
“The sub-index tracking views on "whether now is a good time to buy a major household item" was down only slightly in July (–1.7 per cent) but separate indexes tracking views on ‘time to buy a dwelling’ and ‘time to buy a car’ both recorded sharp falls (–8.4 per cent and –10.3 per cent respectively). All ‘time to buy’ indexes are still at high levels overall but the declines again highlight the air of fragility around consumer sentiment.”