During most of the period between 2014 and 2018 there has been a divergence between consumer sentiment and business confidence in Australia. The latest consumer survey may mark the beginning of a convergence of the two sectors. Although one month’s reading is hardly enough to rely on, perhaps Westpac chief economist Bill Evans knew something when he referred to “a clear improvement” in consumer sentiment after last month’s report.
According to the latest Westpac-Melbourne Institute survey conducted in the first week of July, households’ levels of optimism improved markedly as the Consumer Sentiment Index inched up from June’s reading of 102.1 to 106.1. Any reading above 100 indicates the number of consumers who are optimistic is greater than the number of consumers who are pessimistic. The long-term average reading is just over 101.
While significantly higher than readings over the last five years or so, Westpac senior economist Matthew Hassan was quick to point out it was “not that strong” and still below the average of readings in the ten years prior to the GFC. On the plus side, he noted “a more balanced growth profile across states” along with a mining-led recovery in Queensland and Western Australia. All the same, “a lift in consumer demand still looks unlikely near term.”