The consumer mood has improved materially over the course of 2024, but remains pessimistic overall, the year ending with renewed concerns about the economic outlook.
Westpac-Melbourne Institute consumer sentiment index for Australia fell by 2 per cent to 92.8 in December from 94.6 in November.
Assessments of current conditions continue to post solid improvements.
But consumers have turned pessimistic again on economic outlook.
Renewed concerns about the outlook have taken some of the gloss off consumer confidence around jobs.
Consumers continue to report solid improvements in ‘current conditions’, reflecting assessments of finances compared to a year ago and whether now is a good ‘time to buy a major household item’, but the latest month has seen this more than offset by a loss of confidence around the outlook, particularly for the economy.
That likely reflects several factors, including a disappointing September quarter national accounts update; ongoing uncertainty around inflation and the potential for interest rate easing; and a more unsettled global backdrop, an official release said.
The biggest pull-back was around expectations for the economy. The ‘economic outlook, next 12 months’ sub-index dropped by 9.6 per cent to 91.2, while the ‘economic outlook, next 5 years’ sub-index fell by 7.9 per cent to 95.9.
Both sub-indexes unwound about half of the rally seen over the previous two months. The September quarter national accounts update, released on December 4, showed a disappointing performance with annual GDP growth slowing to just 0.8 per cent per year and private demand stalling flat over the last six months.
Year-ahead expectations recorded particularly sharp falls amongst consumers with a mortgage, expectations for the economy down by 13.8 per cent and expectations for family finances down by 10 per cent amongst this sub-group.
More promising signs were visible for retailers: buyer sentiment is starting to recover. The ‘time to buy a major household item’ sub-index registered a significant improvement in December, rising by 4.8 per cent to 89.2, a two-and-a-half-year high.
Buyer sentiment in Australia is still downbeat and well below long run average levels, but the shift suggests the shock from surging prices and the associated loss of purchasing power is finally starting to fade.
Renewed concerns about the outlook have taken some of the gloss off consumer confidence around jobs. The Westpac-Melbourne Institute unemployment expectations index rose 2.7 per cent to 123.7 in December.
Job loss fears remain relatively low with expectations still below the long run average index read of 129, having fallen by over 10 per cent since September.
The picture remains consistent with a benign outlook for the labour market. The unemployment rate has held steady around 4 per cent over the last six months.
Fibre2Fashion News Desk (DS)
