In one of the latest signs that consumer confidence is actually on the uptick, the Westpac Consumer Sentiment survey has recorded a “welcome and surprisingly strong result” for November – even after the Reserve Bank declined to cut rates.
It’s a far cry from the results of yesterday’s NAB business survey, which found that business confidence has plummeted to its worst level in three years.
Westpac economist Bill Evans said in a statement this morning the index has reached its highest point since April 2011 – noting that the 150 basis points of interest cuts made over the past year is “finally starting to have an impact”.
He also notes this result takes into account the fact the RBA didn’t cut rates on Melbourne Cup day.
“It appears that the ‘disappointment’ effect of the bank’s decision has been quite muted,” he said.
“The more likely explanation for this strong uplift is that households are becoming more comfortable with the global outlook and are finally responding to the series of rate cuts.”
Several of the sub-indexes have recorded positive results, including indexes on family finances versus a year ago, expected family finances over the next 12 months, and views on increased economic conditions over the next 12 months are positive too.
The major negative factor is the slowdown in the mining boom, Evans said, with confidence down 5.2% in Western Australia. It also fell heavily in South Australia, but in New South Wales sentiment “surged” by 14.2%.
There’s even good news for the housing market. Those who have mortgages increased their positive sentiment by 9.2%, while the index for whether now is a good time to buy a dwelling remained unchanged from last month when it jumped by 9.6%.
There were several factors contributing to the result, including the fact that unemployment hasn’t risen, and even the re-election of Barack Obama in the United States.
In fact, Evans says this may account for a 17% jump in sentiment among 18-24 year olds – that index is now at its highest point since January 2010.
While the index is only 0.9% above its level from a year ago, despite 125 points cut from the official interest rate, the cuts appear to be having some positive impact on families’ assessment of their own finances.
“With households more confident around their finances and more positive around their spending intentions than last year, this November result should be of some comfort to retailers that the critical Christmas spending period will show some improvement on last year.”
Evans says the sentiment report suggests that while the confidence result is good, it is “not yet convincing” – and argues further rate cuts are needed to build on early signs of recovery.
Westpac expects another rate cut next month as a result.