Daily Commentary BY THE CURVE TEAM –

Bright Spot Amongst Consumer Confidence Fall

13th of September, 2018

Following the recent out of cycle rate hikes from the banks and intensification of political uncertainty, it was no surprise that it has an effect on consumer sentiment. However the one bright spot is the detail which isn’t all bad for the outlook.

The latest monthly consumer sentiment report released yesterday confirmed a further slide in consumer confidence over the past month. Almost all subcomponents of the index posted declines over the month. Longer term expectations for the economy took the biggest hit while family finances compared to a year ago and for the year ahead, were both lower.

According to Westpac’s accompanying commentary to the data release:

“The topics with the highest recall were “interest rates” (24%, the highest in 2½ years); ‘economic conditions’ (20%); ‘Budget and tax’ (20%); and ‘politics’ (14%, a four year high). In each case the news in September was viewed as more unfavourable than in June.”

So it should come as no surprise that headline consumer sentiment index slipped a further 3%. The index now sits at 100.5, meaning that optimists outweigh pessimists by the smallest of margins.

There was one bright spot amongst the negativity. The Unemployment Index fell 6.6% in September which is a positive, as a lower reading means consumers are less worried about job security.

It is likely that the strong growth figures from the second quarter combined with the widely publicised fall in the unemployment rate helped lift consumer’s confidence around the jobs market. The fact that expectations around the economy for the next 12 month were the second best porforming sub index, only falling 0.1%, suggests as much.

It also means today’s employment report will be as important as ever when it comes to consumer confidence and the outlook.

The market is expecting jobs growth to have returned in August with the median estimate suggesting total jobs growth of 18,000 for the month. The unemployment rate is expected to remain unchanged at 5.3% while the participation rate is expected to lift 0.1% to 65.6%.

David Flanagan

Director - Interest Rate Markets