Red Book: Consumer to slow

From Westpac’s superb Red Book of consumer sentiment:

― The Westpac–Melbourne Institute Consumer Sentiment Index fell 3.2% in Jul from 95.3 in Jun to 92.2, the lowest print since Dec.

― Overseas events were a major negative with the survey conducted at the height of the latest crisis in Greece and China’s sharemarket slump.

― The survey detail suggests a slight softening in ‘underlying’ sentiment although notably, unemployment expectations improved slightly.

― Our CSI± measure – a modifi ed sentiment indicator that we favour as a guide to actual spending – edged 0.7% lower but is fi rmer than the headline index overall and comfortably above its Dec low. The index is pointing to fl at/ stalled per capita spending growth over 2015 H2, implying a signifi cant ½-1% slowdown on the current pace.

― Sentiment around housing was, arguably, the most signifi cant development this month. The ‘time to buy dwellnig’ sub-index tumbled 15.4% to its lowest level since mid 2010. Seasonality may have amplifi ed the monthly fall but even allowing for this buyer sentiment is showing signs of taking another leg lower. The state breakdown points to aff ordability pressures as a key driver.

― The Westpac-Melbourne Institute Consumer House Price Expectations Index rose 8.2% in Jul to 145.9 with last month’s dip to 134.9 now looking more clearly to be a seasonal decline. Consumers in NSW, Vic and Qld remain the most bullish on prices. Consumers in WA are markedly more downbeat.

― The Westpac-Melbourne Institute Unemployment Expectations Index fell 1.3% in Jul, indicating slightly fewer consumers expect unemployment to rise in the year ahead. The muted reaction compared to the headline sentiment fall suggests the ‘shock’ from overseas news this month is not particularly deep and is unlikely to be sustained. While the stable read is relatively good news, unemployment expectations continue to point to a very weak outlook for the labour market.