Consumers remain in dour mood according to today’s Westpac/Melbourne Institute consumer confidence survey which showed a small rise of 2.4% but remains well off optimistic readings.
According to Bill Evans:
This is a somewhat disappointing result. Despite the Reserve Bank having cut the overnight cash rate by a total of 50bps with the major banks passing on the full cut to variable rate mortgage borrowers the Index is still slightly below the level which it registered before the first rate cut. In effect, at this stage, the rate cuts have been unable to raise consumer confidence.
That does not mean that the cuts have necessarily had no effect. Given ongoing financial turmoil in Europe; a flat housing market and further weakness in the labour market sentiment is likely to have been lower without the rate cuts.
Unsurprisingly, consumer confidence is struggling to get off the floor. I expect this to continue at least through the first half as job losses accumulate, despite rate cuts.
Interestingly, despite the near total lack of response to rate cuts in mortgage issuance (outside of stimulated NSW FHBs) , there has been an uptick in the “time to buy a dwelling” component of the index. The level has risen to just above where it was in January 2010, which exhibited very different conditions:
Full report below.
