There was a 1.9 per cent fall in the Westpac/Melbourne Institute consumer sentiment index for December, released last week.
It currently sits at stands at 95.1 points, below the longer term average of 101.5 points.
A reading below 100 points denotes pessimism, although economists believe are more apprehensive about how 2020 will unfold than negative.
Westpac noted that confidence has fallen 6.1 per cent since the RBA first cut rates in June, which suggests that people are worried about the disconnect between low rates and politicians who say things are great.
People appear to be concerned, although it certainly didn’t stop them spending in the Black Friday/Cyber Monday sales, but the question is whether they simply brought spending forward to concentrate it around that online promotion.
All five components of the Westpac/Melbourne Institute consumer sentiment index fell in December:
- The estimate of family finances compared with a year ago fell by 3.6 per cent to 81.4 points;
- The estimate of family finances over the next year fell by 0.5 per cent to 98.1 points;
- Economic conditions over the next 12 months fell by 1.1 per cent to 89.6 points;
- Economic conditions over the next 5 years fell by 2.4 per cent to 91.2 points;
- The measure on whether it was a good time to buy a major household item fell by 2.1 per cent to 115.4
points.
One the question of whether it was a good time to buy a dwelling, the index fell by 5.6 per cent to 112.3 points, although it still sits up 1.8 per cent for the year. House price expectations rose by 3.2 per cent to 140.1 points, up 40.1 per cent on a year ago.
Unemployment expectations rose by 1.1 per cent to 138 points as people worried about a weaker job market.
One detail that stood out in the survey that rise of banks as the place people want to put their savings.
Asked about the “wisest” place to put savings, banks have climbed from an 11-year-low of 24.9 per cent in June to 28.5 per cent
in December as the preferred place for savings, despite a booming share market and low interest rates.
“Paying down debt” is a strong focus with 22.5 per cent saying that’s their preference (up from 20.7 per cent).
That’s nearly half of people taking a very conservative approach. No wonder retail sales are soft.
Next is real estate, although that’s down from a 21-month high of 11.9 per cent in September to 10.2 per cent now.
Shares are at 8.8 per cent, but the number of people that “don’t know” rose to a 24-year high of 8.7 per cent, up from to 6.8 per cent. Only 5 per cent of people think “spent it” is the wisest use for their savings. This year’s tax refunds are being banked.
Combined, that says all you need to know about the consumer sentiment index. We are feeling very cautious.
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