It’s official: consumer confidence has rebounded, reaching 2-year high

by Marketing ON 13 March 2013

Consumer confidence rose 2.0% in March, marking the third consecutive rise and fifth month running where the number of optimists outweighed the number of pessimists.

Westpac-Melbourne Institute’s ‘Index of Consumer Sentiment’ has hit 110.5, on a scale where 100 represents a neutral point and scores above indicate positive sentiment. The rise follows a stellar 7.7% jump in February.

Westpac’s chief economist, Bill Evans, says the result represents the highest level of the Index since December 2010 and a jump of 15.1% over the last year.

That follows a period of 16 months when the Index was below 100 on 14 of those 16 months.

“Despite the Reserve Bank reducing its cash rate by 175 [basis points] between November 2011 and December 2012 the Index averaged a modest 98 over the course of 2012,” Evans adds, pointing to the unresponsiveness of the measure to rate cuts.

“However, in recent months we have seen the accumulation of the cuts appearing to be genuinely boosting confidence. Equity markets and the associated signals that global economic prospects are improving are the other key driver of this improved confidence.”

The sharemarket continued its strong start to the year over the past few weeks, rising a further 3% between the February and March surveys to be up 10% for the year and 20% from its September low.

Respondents to the survey, conducted between 4 March and 10 March, were most likely to recall news around ‘domestic economic conditions’, ‘budget and taxation’, ‘interest rates’, ‘international conditions’ and ‘employment’.

Solid increase in perceptions of family finances drove the improvement in March. The sub-index tracking views on ‘family finances versus a year ago’ increased by 3.9%, while perceptions of ‘family finances over the next 12 months’ rose by 3.1%.

There were also improvements in the economic outlook with the sub-indexes tracking views on ‘economic conditions over the next 12 months’ up 0.8% and ‘economic conditions over the next 5 years’ up 0.8%.

Since December the ‘time to buy a dwelling’ Index increased by 1.6% from 142.2 in December to 144.5 in March. This Index is now up by 19.6% over the last 12 months. In contrast, opinions on ‘whether now is a good time to buy a major household item’ cooled, with this sub-index down 1.6%.

Despite higher confidence and strong market performance households remain watchful of their savings, Evans cautions. “In December 39.8% of respondents favoured bank deposits or other fixed interest investment s as the ‘wisest place for savings’. That proportion increased to 41.3% in March.

The Reserve Bank Board next meets on 2 April. Westpac does not expect a cash rate cut to come at that meeting, but forecasts more cuts later in the year.

Consumer confidence resurgence: sharemarket recovery renews faith in economy

by Marketing ON 13 February 2013

Consumer confidence soared by 7.7% in February to put the ‘Westpac Melbourne Institute Index of Consumer Sentiment’ at a two-year high amid vastly improved perceptions of the economy.

The jump, to 108.3, sees the index break free of an extended period of declining or neutral readings, with the sharemarket recovery suspected as a motivator for increased confidence in the economy.

Interest rate cuts, which have seen a 175 basis points reduction since October 2011, may also finally be starting to gain more traction with the consumer, says Westpac’s chief economist, Bill Evans.

But Evans also notes the influence of media on the index is hard to predict, with mixed news of an interest rate on hold, mild housing market recovery, weak retail sales and dwelling approvals data, and flat-lining unemployment a motley backdrop to the strong gain.

The piece of news that is new over the past few years is growth in the stockmarket. “Sentiment may have been buoyed by a strong start to the year for financial markets,” Evans speculates. “The ASX rose 4.8% between the January and February and surveys and is up 13.8% from its mid-November low. News from offshore has also been broadly supportive.”

All index components recorded gains in February, but the strongest lift in sentiment came around views on the economy. The sub-index tracking consumer expectations for ‘economic conditions over the next 12 months’ surged 14.7%.

The longer term outlook also lifted with the sub-index tracking views on ‘economic conditions over the next 5 years’ up 10.8%, to reach well above its long run average.

On the other hand consumers had more mixed opinions of their own finances. The sub-index tracking assessments of ‘family finances versus a year ago’ posted a solid 7.3% rise but remains weak overall, while the measure tracking forward views on ‘family finances over the next 12 months’ was only marginally higher.

There were encouraging signs for retailers however with consumer views on ‘time to buy a major household item’ up 5.5% to its highest level since October 2010, mirroring findings from a Nielsen study conducted in the last quarter of 2012.

Looking ahead, Evans says the improvement will need to be sustained and flow through to actual spending to counteract the downturn in mining investment expected in the second half of this year.

“At this stage, the picture on actual activity is still not convincing. Housing finance and retail sales figures point to significantly weaker momentum in these sectors late last year. Meanwhile the non-mining business sector also looks an unconvincing prospect to help offset the mining slowdown with higher investment. Without businesses supporting the economy by lifting investment and employment plans, consumer optimism could quickly fade. Consumers could also lose confidence if the more positive tone on the global economy and sharemarket rally are not sustained.”

Westpac expects a drop of 25 basis points when the Reserve Bank Board next meets on 5 March.

Confidence levels remain well below the levels recorded during the last interest rate easing cycle in 2008-09 which saw sustained readings of around 120.

Upswing in retail spend predicted as purchase intent skyrockets: study

by Marketing ON 6 February 2013

Intent to make major purchases among Australians skyrocketed at the end of last year, according to Nielsen, leading the research agency to predict an imminent upswing in retail spend.

More than one in two (55%) believed the next 12 months will be a good time to buy things they want and need when asked in quarter four of 2012 – a jump of 13% on the previous quarter – a study fielded in November found.

This rise in retail optimism comes despite languishing consumer confidence, a measure built from a range of indicators in addition to purchase intent. Nielsen’s ‘Global Survey of Consumer Confidence and Spending Intentions’ study recorded a three point fall in Australian consumer confidence to 95 for quarter four of 2012, mirroring ‘disappointing’ results logged by Westpac-Melbourne Institute’s ‘Index of Consumer Sentiment’ in January.

Nielsen’s results point to renewed hopes for a positive retail environment in 2013, says managing director of Nielsen Pacific, Chris Percy. “Despite a slight drop in consumer confidence, the figures show a turning point in the financial stability of most Australians.

“The number of consumers signalling their intention to buy the things they want or need over the coming year indicates a shift to positive sentiment when it comes to consumer spending, helping retailers to breathe a sigh of relief.”

Nielsen analysis shows that saving intention dropped by 1% quarter on quarter, which the researchers labels another indication of an imminent spending upswing, even though it’s not a statistically significant change.

“Globally, we have seen a drop in savings by three percentage points, and Australia is following that trend,” Percy believes. “Locally, retailers can breathe a sigh of relief as consumers become more comfortable with their discretionary spending. When asked how they will use spare cash after covering essential living expenses, one in four said they would buy new clothes and one in three intends to put their spare cash towards holidaying.”

Australian consumers also continue to be confident in their job prospects, with close to half (44%) anticipating employment opportunities would be ‘good’ or ‘excellent’ in the coming year.

Overall, global consumer confidence saw a one-point quarter-on-quarter decline over the current period to 91 points, putting it two points higher than the same time in 2011.

Asia Pacific reported the highest levels of confidence overall, on 101, but still experienced quarter-on-quarter declines in eight of its 14 markets.

Europe continues to have the lowest consumer confidence levels, with a drop of three points to 71, while Latin America improved slightly to 96 and the United States fell one point to 89.

Of the 58 countries surveyed, North America posted the most significant decline in confidence over the past year, down 15 points to 71, while Greece continued to decline, reaching a lowly 35.

Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.

Nielsen’s ‘Global Survey of Consumer Confidence and Spending Intentions’ quarter four 2012 was conducted between 10 – 27 November –27, 2012, among more than 29,000 online consumers in 58 countries throughout Asia-Pacific, Europe, Latin America, the Middle East, Africa, and North America. Sample was weighted to be representative of Internet consumers.

Confidence dives ahead of Christmas despite rate cut

by Marketing ON 14 December 2012

Consumer confidence has taken an unexpected dive ahead of Christmas, down by 4.1% to a neutral point of 100.0, according to the Westpac Melbourne Institute Index of Consumer Sentiment.

The measure, which is intended to indicate consumer’s propensity to spend, continues to be topsy turvy, with the drop following a similarly large increase of 5.2% in November.

Westpac’s chief economist, Bill Evans, says the drop, which came despite last week’s rate cut, is a very surprising result. “When we saw the 5.2% increase in the Index in November, which came despite the Reserve Bank surprising by holding rates steady, it appeared that sentiment was finally starting to respond to the accumulated series of rate cuts since November last year,” Evans says.

“With that in mind it was therefore reasonable to expect that the Index would respond quite positively to the rate cut the Reserve Bank delivered last week. Instead the Index fell back to near its October level and is now 3.2% below its November 2011 level.”

The rate cut did have an impact on mortgage holders whose confidence rose by 4.4%, but renters and outright owners of properties were very downbeat. Confidence of those who are renting fell 9.1% while for those who wholly own their property confidence was down 10.9%.

The survey also tracks major news events and their influence on confidence. It found the news items which had the largest impact were around economic conditions, with 60% of respondents recalling news items on the economy, while only 28.9% recalled the news of interest rate cuts, and 20% or less recalled stories around budget and taxation, international economic conditions, inflation or employment.

“Respondents continued to view news as quite negative around economic conditions,” Evans explains. “Apparently the fall in headline unemployment from 5.4% to 5.2% which was announced during the survey week had limited impact on respondents.”

December’s rate cut did boost the perception that now is a good time to purchase a house, with the index tracking sentiment on this measure improving to its highest level since September 2009, a year in which Australian house prices increased 14%.

Respondents to the survey, conducted between 3 and 9 December, were more confident around the outlook for their finances – the only sub-index the register an increase – while perceptions of finances compared to a year ago, economic conditions over the next twelve months and next five years, and whether now is a good time to purchase a major household item all fell.

Evans predicts another rate cut when the Reserve Bank Board next meets on February 5. “Evidence to date is that low rates are not generating much traction with households. Hence there is likely to be a decision to further ease rates in February or March”, he says.

Rate cut fails to lift consumer mood

by Marketing ON 10 October 2012

Last week’s rate cut failed to have a significant impact on consumer confidence, according to Westpac-Melbourne Institute’s (WMI) Consumer Sentiment Index, which rose a “disappointing” 1% in October.

The result was disappointing for Westpac’s chief economist, Bill Evans, who expected an increase of more than 1%. “The Reserve Bank cut its overnight cash rate by 0.25% from 3.5% to 3.25%… [this] should have registered as a ‘pleasant surprise’ for respondents,” Evans says. “Instead we saw the sentiment of those folks with a mortgage hardly move with a miniscule 0.6% increase.”

While the response of the major banks, most of which announced mortgage rate reductions on October 5, came five days into the seven day survey period, Evans expresses concern that the Index remains 4.1% lower than November last year, particularly given the cash rate is 1.25% lower than that time.

The weakness in October centred around views around the economy, with perceptions of economic conditions over the next 12 months down by 2.4% and the five year economic outlook down by 4.6%.

Despite the subdued result, some promising signs emerged in the October survey. Three of the five components of the Index increased – perceptions of ‘family finances compared to a year ago’ improved by 5.3%, expectations for ‘family finances over the next twelve months’ were up 2.8% and ‘time to buy a dwelling’ surged 9.6% to be up 17.9% in two months and reach its highest level since September.

Rival consumer confidence measure, Roy Morgan’s Consumer Confidence Rating, hints that confidence may have increased to a greater extent after the banks passed the rate cut on. Conducted early this week, a few days after WMI’s survey period, it recorded a 2.4 point increase to 114.8 points. Produced using a slightly different methodology, Roy Morgan’s survey regularly shows differing results to WMI’s and typically registers higher levels of optimism.

Consumers stuck in a rut as bad as during the GFC

by Marketing ON 12 September 2012

Consumers are well and truly stuck in a rut, according to the latest consumer confidence figures, which show September’s confidence levels to be as bad if not worse than during the height of the global financial crisis.

Westpac-Melbourne Institute (WMI) said consumers are in an “extended cautiously pessimistic phase” with September the seventh consecutive month that the Index has been below 100, a stretch only surpassed in 2008/09 and the early 1990s.

Roy Morgan Research reports that September’s consumer confidence reading is one of the lowest since the GFC. However, it remains a much higher reading at 112.0 points compared to WMI’s at 98.2.

Both confidence indices are calculated from a neutral point of 100 plus or minus the average number of favourable or unfavourable answers to five key questions. A score above 100 indicates that the number of optimists outweigh the number of pessimists and vice-versa for a number below 100. Fieldwork for Roy Morgan’s study was conducted on the weekend of September 8/9 while WMI’s took place between 3 and 8 September.

Chief economist at Westpac, Bill Evans says the results does not bode well for consumer spending and is consistent with the slowdown in consumer spending indicated by the June quarter national accounts. “With a sharp fall in July retail sales confirming this boost is now reversing, underlying momentum appears to be soft, in line with the consistently downbeat signal from the consumer sentiment index.”

Executive Chairman of Roy Morgan Research, Gary Morgan, pointed to a weakening in the mining sector for these latest consumer confidence figures. “The weakness in iron ore prices and another key commodity – coal – suggest Australia’s mining boom may be coming to an end, threatening the Gillard Government’s promised surplus.

“Notably, iron ore miner Fortescue last week responded to the falling iron ore price by cancelling a planned expansion in WA’s Pilbara, sacking 1,000 employees and contractors. Extensive publicity has also surrounded BHP Billiton’s cancellation of a proposed $30 billion expansion of its Olympic Dam copper and uranium mine in South Australia and the shelving of plans to expand its port facilities in Port Hedland – further clear indications of the weakness of commodity prices.”

WMI’s index rose slightly over the past month, up 1.6 points to 98.2, while Roy Morgan’s dropped by 3.4 points to 112.0. Both are reading at or below the levels of September last year.

August consumer confidence: Aussie dollar, Olympics, RBA create confidence yo-yo

by Marketing ON 16 August 2012

Despite being conducted just three days apart and using almost identical methodologies, consumer confidence figures from Roy Morgan Research and Westpac-Melbourne Institue (WMI) disagree on whether confidence is up or down in August.

Westpac’s chief economist Bill Evans expressed surprise at WMI’s 2.5% drop given media coverage had been more positive recently due to rises in retail spend, recent rates cuts from the RBA and somewhat of a stabilisation in Europe.

Gary Morgan, executive chairman of Roy Morgan Research alluded to the strong Aussie dollar and Olympics as potential factors behind the rise in Roy Morgan’s rating.

Read below the summary of this month’s results and comment from the studies’ economists.

Latest results

Roy Morgan Research Consumer Confidence Rating (weekly measure) – August 13/14, 2012

The rating has risen to 113.1 points, up 2.5 points in a week, and is now 3.3 points higher than a month ago and 5.3 points higher than a year ago.

Westpac–Melbourne Institute Index of Consumer Sentiment (monthly measure) – May 6-10, 2012

The index decreased to 96.6 points, down 2.5 points over the past month but 7.0 points higher than a year ago.

NB: When reading the chart, please note that the numbers are not directly comparable due to slight methodological differences. Both are calculated from a neutral point of 100 plus the unweighted average of the difference between the proportion of respondents who give favourable versus unfavourable answers to five key questions. A score above 100 indicates that the number of optimists outweigh the number of pessimists and vice-a-versa for a number below 100.

What are the pollsters saying about current confidence levels?

Gary Morgan, executive chairman, Roy Morgan

“As the London Olympic Games closed over the weekend Australian consumer confidence rose 2.1points to 113.1 — it’s highest for three months since May 12/13, 2012. Driving the rise was a strong increase in Australians saying now is a ‘good time to buy’ major household items — up 7% to 58%.

“Also contributing to the rise was increasing optimism about the Australian economy with 32% (up 1%) expecting ‘good times’ for the Australian economy over the next 12 months and 34% (up 2%) expecting ‘good times’ for Australia’s economy over the next five years.

“The RBA’s decision to leave interest rates unchanged last week at 3.5% – amongst the highest in the developed world – appears to have had little immediate impact on consumer confidence although it has strengthened the Australian Dollar which has traded clearly above US$1.05 in the past week.”

Bill Evans, chief economist, Westpac

“There has been enough positive news around since the last survey, and generally over the last few months, to have sustained an upswing in Consumer Sentiment. News that retail spending was boosted in the first half of the year; unemployment remains low; the Government has released $1.9bn in fiscal compensation over the May–June period; the Reserve Bank had cut the overnight cash rate by 0.75% in May/June; and the President of the European Central Bank has been promising to “do whatever it takes” to save the Euro has been unsuccessful in sustaining an upswing in sentiment.

“Indicative of a more positive global outlook the share market has risen by 2.9% and the Australian dollar has risen from around USD 1.02 to USD 1.05 since the survey in July, the latter also reflecting Australia’s attractive interest rate differential.

“This is the sixth consecutive month that the Index has registered below 100, averaging 96.2. This is unusual. The only comparable periods since the recession of the early 1990s are in 2000–01 when the Index printed an average of 96.5 over an eight month period and in 2008–09 when it averaged 88.0 over a 16 month period.

“Media reports that the Reserve Bank may have decided against future rate cuts are likely to have unnerved households. For example, despite rates staying on hold the confidence of respondents who hold a mortgage fell by 3.9%.

Consumer confidence surges to start the new year

Posted on January 13, 2012 by Marketing

Australians are feeling good about the new year according to this week’s Roy Morgan Consumer Confidence Rating. Confidence jumped 9.4 points to reach its highest peak in eight months. But although it hasn’t been higher since May 2011, the confidence rating is still 5.3 points lower than the same time last year. Read more…

Consumer confidence up or down? Rival measures disagree

Posted on December 17, 2011 by Marketing

Consumer confidence has always been hard to track, and at the moment even the researchers seem to be struggling. Rival measures, the Roy Morgan Consumer Confidence Rating and The Westpac/Melbourne Institute Index of Consumer Sentiment, disagree on whether confidence is up or down despite being conducted in the same week of December. Read more…

Study reveals consumer climate in emerging markets

Posted on January 25, 2012 by Marketing

While Brazilians are big spenders, the Chinese are saving, Indians are study geeks and the Russians are on a downer, brands are looking at exponential growth in emerging markets over the next few years as consumers look to ‘trade up’ in these nations. In a look at current consumer behaviour in key emerging markets Read more…

Consumer Confidence Yo-Yo

Posted on April 8, 2011 by Marketing

Australians are a confused country of consumers, if the Roy Morgan Weekly Consumer Confidence Rating is anything to go by. Research from last week showed that there was a 2% drop in Australian consumer confidence about their personal financial situations from the week before Read more…

Australian consumer confidence on the up again

Posted on March 17, 2011 by Marketing

Australian consumer confidence is on the up and up. This week’s Roy Morgan Consumer Confidence rating has risen to 118.8pts (up 3.3pts in a week). However, that figure is still 6.6pts lower than this time a year ago. Read more…

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