August consumer confidence: Aussie dollar, Olympics, RBA create confidence yo-yo
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.
Roy Morgan Research Consumer Confidence Rating (weekly measure) – August 13/14, 2012
Westpac-Melbourne Institute Index of Consumer Sentiment (monthly measure) – May 6-10, 2012NB: 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%.
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