Australian consumers setting up for a 'lukewarm' Christmas spend: Westpac's Matthew Hassan
The November Westpac-Melbourne Institute Consumer Sentiment survey included an additional question on plans for spending on Christmas gifts, asking: “will spend less, about the same, or more compared to last year?” The results show consumers taking a more restrained approach in 2016 with 34% planning to 'spend less’, 52% 'the same’ and 14% ‘more’. That compares to a 30%:53%:17% mix in 2015.
The simplest summary measure of intentions is an index based on the net balance of responses, i.e. 100 + %more – %less. On this basis, the 2016 reading is 79.9, down from 87.0 in 2015. That in turn followed five successive years of readings in the 77-79 range, a disastrous 66 reading in the depths of the GFC and a record high 91 during the consumer boom in 2007.
All up that places 2016's read down sharply on 2015 but still a touch above the lacklustre results over the previous five years. Going by the retail sales results in those years this looks to be roughly consistent with a 1.5-2%yr rise in per capita spending. With population growth tracking at 1.4%yr, total retail sales will likely be up about 3-31⁄2%yr – a 'so-so' year compared to the 5% gain in 2015.
The survey detail shows the biggest cooling off vs a year ago has been in NSW, with spending plans notably firmer in Vic and improving marginally on last year for consumers in SA, Qld and WA. That said, spending plans in SA and the 'mining states' are still tracking at markedly weaker levels than in NSW and Vic. By sub-group, the biggest pull backs vs a year ago have been amongst 18-34 year old's, those on lower incomes and females. Those with annual incomes in the $60-100k were notably more positive, both compared to previous years and with other groups.
The picture from Consumer Sentiment more generally also shows a 'lukewarm' lead-in to the holiday period. Sentiment is tracking at similar levels to last year but with views around family finances notably softer.
Casting our gaze back further, over the entire 42yr history of the survey, the sentiment lead-in to Christmas 2016 is in the middle of the pack – a long way above the bleak recession years in the early-90s and early-80s and deeply unsettled GFC year in 2008 but also a far cry from the 'golden' years in the mid-80s, the early to mid-2000s and the post GFC bounce in 2009. We will leave it to readers to draw parallels with weather patterns, cricket performances and the like.
Matthew Hassan is senior economist with Westpac.
