Westpac-Melbourne Institute Consumer Confidence is out and we’ve had an infinitesimal rise on the back of the RBA cut:
This is another disappointing result. There were a number of reasons to have expected the Sentiment Index to have increased by more than only 1%. Firstly, and most importantly, the Reserve Bank cut its overnight cash rate by 0.25% from 3.5% to 3.25%. Unlike some moves by the Bank which are fully expected by the media and therefore may not have a marked impact on confidence this move was not widely expected and therefore should have registered as a ‘pleasant surprise’ for respondents. Instead we saw the sentiment of those folks with a mortgage hardly move with a miniscule 0.6% increase. Of course a likely complication was the response of the major banks, most of which only announced their mortgage rate reductions on October 5 – five days into the seven day sample period – with reductions ranging from 0.18% to 0.20%. The Westpac Melbourne Institute Index of Consumer Sentiment increased by 1% in October from 98.2 in September to 99.2 in October.
Bill Evans also notes that:
The most encouraging result from today’s survey came from the index tracking views on ‘time to buy a dwelling’ which surged 9.6% to be up 17.9% in two months and reaching its highest level since September 2009 – the last period when the sentiment overall was surging strongly. This message is consistent with other recent evidence of firming auction clearance rates. The response of the housing market to the recent rate cuts will be very important to watch.
I will add that the time to buy a dwelling component has actually been quite high for a year now without it showing up in the marketplace. Still, hard to argue that some short term momentum isn’t building.
