Weakest consumer sentiment reads since GFC: Westpac

Falls in consumer sentiment mark the weakest succession of reads since 2008, says Westpac.

Consumer sentiment has fallen for the ninth consecutive month, marking the weakest succession of reads since 2008, the time of the global financial crisis.

The latest Westpac-Melbourne Institute Index of consumer sentiment fell 1.2 per cent in August to 95.5, from 96.6 in July.

Westpac’s chief economist Bill Evans said increased family finance pressures, concerns surrounding interests rates and housing affordability in NSW and Victoria had outweighed a boost in jobs confidence.

“The further weakening in consumer sentiment comes despite some positives leading into this month’s survey,” Mr Evans said, noting the Reserve Bank’s leaving interest rates unchanged, a continued improvement in labour market conditions and a booming Australia dollar.

Views on current finances compared to a year ago fell 5.1 per cent to 78.1 — the lowest level since June 2014 when consumers reacted to the Abbott government’s first budget.

“Much of the weakness is likely to reflect a mix of weak growth in wages, increases in key costs such as electricity and emerging concerns about rising interest rates,” Mr Evans said.

He added that weak sentiment around current finances appear to have affected consumer attitude towards major purchases.

The index on whether consumers thought now was a good time to buy a major household item index fell 4.9 per cent, unwinding most of the six per cent improvement seen over June-July.

“Notably, the pullback has come despite increasingly aggressive price discounting amongst retailers and a likely further improvement in purchasing power from a higher Australian dollar,” he said.

Despite the bleak sentiment around current finances, consumer expectations were more upbeat, particularly around jobs, Mr Evans said.

Unemployment expectations fell 2.6 per cent, marking the lowest level since November 2011.

Sentiment around finances over the next year were up 2.1 per cent, while confidence rose 2.3 per cent around economic conditions in the next five years, after a sharp drop over the previous two months.

Meanwhile, house buying sentiment fell towards very low levels in Sydney and Melbourne, where affordability pressures remain acute, but surged in Western Australia.

The Australian dollar fell 0.6 per cent on the Westpac release after trading mostly flat and remained US47 cents lower at US78.68 cents.

AAP