Find below Westpac’s bible of consumer attitudes, the Red Book, for February, 2013. The key points are:
- The Westpac–Melbourne Institute Index of Consumer Sentiment posted a strong 7.7% rise in Feb, moving from ‘neutral’ to ‘optimistic’ territory.
- The Feb gain came despite a mixed range of influences in the month: the RBA leaving rates on hold; economic data releases ranging from surprisingly weak (retail, dwelling approvals), to steady (unemployment) and mildly positive (house prices). A strong sharemarket performance and a less threatening global backdrop would have been positives as well.
- The Feb gain was broad-based. All component indexes posted rises with particularly strong increases in those tracking views on the economic outlook and ‘time to buy a major item’ – components which often lead cyclical shifts.
- The circumstantial evidence and survey detail suggest the rise in sentiment is a genuine cyclical upturn rather than a ‘one-off ’. In particular it suggests lower interest rates may finally be starting to generate more positive traction with the consumer.
- CSI±, our modified consumer sentiment indicator, posted a solid though less impressive 3.7pt gain. It points to a modest firming in demand by about mid-2013. However the starting point for actual spending is weaker. Although the poor finish to 2012 for retail sales is partly a reflection of sector specific problems, the weakness of sales growth, the mix and other indicators all point to weaker than expected underlying demand momentum in early 2013.
- Consumer perceptions on ‘time to buy’ remain uniformly upbeat with the sub-indexes on ‘time to buy a major item’, ‘time to buy a vehicle’ and
- ‘time to buy a dwelling’ all near historical highs.
- The main negative to the Feb survey continues to be around labour market conditions. In contrast to the sentiment rise, the Westpac Melbourne Institute Unemployment Expectations Index showed little change in Feb. The modest improvement since Sep was sustained but expectations remain deeply pessimistic overall. Job loss fears look likely to remain a significant restraint on actual spending.
- The Jan survey included additional questions on house price expectations. While few consumers expect prices to decline, expectations have been marked down since Aug particularly in Vic. The picture is consistent with a more tentative, gradual housing recovery than that seen in 2008-09.
- The Feb survey also included additional questions on mortgage interest rate expectations. Responses show a notable hawkish tilt with those expecting rates to rise now outnumbering those expecting further declines.
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