Consumer sentiment pulls back: Westpac's Bill Evans

EXPERT INSIGHT

A pull back in the Index was to be expected.

Since the last survey in the second week of December we have seen domestic border closures; the emergence of Covid clusters in some states; and the sharp upswing in Covid cases overseas, notably the US and the UK.

This result compares to the 15% fall that was registered over July and August last year as the nation was shocked by Victoria’s severe second wave and associated hard lockdown. It still points to healthy Consumer Sentiment.

At 107.0 optimists clearly outnumber pessimists while the Index is 14.6% above the level a year ago and 41.5% above the low in April.

There may also be an element of statistical correction given that the Index had surged by 40% between August and December with the December print reaching its 10 year high.
All components of the Index fell in January.

There were significant falls in the components associated with the economic outlook with the ‘12 month outlook’ falling by 8.3% and the ‘5 year outlook’ down by 4.5%.

Respondents were also less positive about their finances. The component ‘family finances relative to a year ago’ fell by 7% while the ‘12 month outlook for family finances’ was steady, falling by only 0.3%.

Spending intentions were also down with the component ‘time to buy major household items’ slipping by 2.8%.

Since January last year, before Covid was impacting Sentiment the ‘economic outlook’ components have lifted by around 26%; the ‘finances’ components by around 9%; while the ‘time to buy’ is up by 4.8%.

BILL EVANS is the Chief Economist at Westpac