Westpac and the Melbourne Institute released their monthly measure of consumer sentiment this week and it showed that confidence amongst consumers continues to wane. The consumer sentiment index fell to 101.2 points in June 2011, its lowest level since June 2009.
Despite the fall in sentiment, the index remains above 100 points which indicates that consumers are more optimistic than pessimistic, but only just.
The decline in consumer sentiment does not bode well for sales transactions. Historically, as sentiment has fallen so too have sales volumes. Volumes are already particularly weak across the country, sitting -13 % below the five year average. If the measure of consumer confidence remains at these low levels, we would not expect that there will be any significant improvement in sales transaction volumes, subsequently, the prospects for any significant growth in values is also reduced. It is important to note that the index can be quite volatile on a month-to-month basis and is clearly heavily influenced by economic events and releases each month. In saying this, the index has been trending lower since mid 2010.
The consumer sentiment index is comprised of a number of other subsets of data which feed into the overall result. A number of these measures were particularly weak during June 2011. The table below details these measures, comparing them to results 12 months ago, two years ago and five years ago.
There are only two measures which indicate optimism over pessimism at the moment, they are current conditions and time to buy a major household item. It also seems as if the last 12 months has been particularly hard on families with the index at a very low level (75.9 points). It looks although households believe that things aren’t set to get much better either with their expectations about economic conditions indicating a less than confident outlook for the next 12 months and five years. If there needed to be any further evidence of a conservative and uncertain consumer here it is..
by Cameron Kusher on June 17, 2011 in Consumer confidence, Economics, Research