Consumer sentiment tumbles

The Westpac Melbourne Institute Index of Consumer Sentiment fell by 4.8% in December from 110.3 in November to 105.0 in December.

"This is the lowest level of the Index since July this year. It is 4.3% below the average print for the last 3 months which covered the post-election period and the time of most euphoria around house prices. It appears that the boost in confidence partly associated with the election result and booming house prices has faded in December,” said Westpac's Chief Economist, Bill Evans.

“The news around the housing market is mixed and is probably pointing to an affordability constraint impacting the market. The index tracking responses to the question on whether now is a good ‘time to buy a dwelling’ fell by 4.2% in December to be down by 10.5% from its September peak. At the same time, the Westpac Melbourne Institute House Price Expectations Index increased by 1.4% to be up by 14% over the last 5 months. The mix suggests an affordability issue and is most apparent in New South Wales where prices have increased the fastest – the index tracking NSW responses to ‘time to buy a dwelling’ plummeted 13% in December to be down 21.9% from its September peak, while the state measure of house price expectations is 6.1% higher than the national reading,” continued Bill Evans.

“Westpac has maintained a forecast for another rate cut of 25bps at that February [Reserve Bank of Australia] meeting for some time. It may be that the interaction of forces which we envisage takes longer to become apparent to the Board and the rate cut decision is delayed for some months. Of particular concern here is whether the housing data over the next few months is sufficiently reliable. For now, we retain our call for a cut in February while fully recognising that a delay to that move is also a realistic outcome,” concluded Bill Evans. 

Posted by Charles Tarbey on 21/01/2014 at 12:00 AM | Categories:


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