Economy

Consumer confidence falls in October, IMF lowers Australia’s growth outlook: Midday Roundup

Yolanda Redrup /

Consumer confidence has dipped in October, despite a strong boost last month in the wake of the federal election.

The Westpac/Melbourne Institute index of consumer sentiment declined 2.1% to 110.6 points.

Despite the fall the index remains above the 100 point level which indicates whether consumers are largely pessimistic or optimistic.

Westpac chief economist Bill Evans said in a statement the United States government shutdown and speculation over a possible government default could have unnerved respondents.

“Two components rose in the month and three fell. The components tracking consumers’ assessments of the economic outlook over the next 12 months and next five years declined by 2.0% and 7.3% respectively,” he says.

“This adjustment probably reflects a little ‘cooling off’ following the anticipation around the election result.”

One surprising result of the index was a fall of 10.3% in ‘whether now is a good time to buy a dwelling’, but the index still remains positive at 135 points.

IMF lowers Australia’s growth outlook

The International Monetary Fund has downgraded Australia’s growth prospects to 2.5%, in line with economists’ predictions, as China’s demand for commodity exports softens.

In April the IMF had predicted Australia’s growth rate for the year would be 3%, matching the long-term trend.

It’s predictions for 2014 have also been lowered, with the IMF forecasting a growth rate of 2.8% next year, down from 3.3%.

The IMF said in the report global growth is in “low gear”, with growth predicted to be 2.9% globally this year.

“Politics is creating uncertainty … and conflicts around increasing the debt ceiling could lead to another bout of destabilising uncertainty and lower growth,” IMF economic counsellor Olivier Blanchard said in the report.

Shares soft on weaker Wall Street leads

The Australian share market has once again opened lower this morning after a weak night on Wall Street, as the US government shutdown enters its eighth day with no immediate sign of respite.

The benchmark S&P/ASX200 index was down 6.9 points or 0.1% to 5142.5 at 11.50 AEST, while in the United States the Dow Jones Industrial Average fell 159 points or 1.1% to 14776.5.

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