The Westpac – Melbourne Institute September survey of consumer sentiment was released showing a decline in the ratio of optimistic consumers to pessimistic consumers. A value below 100 indicates there are more pessimistic consumers than optimists and the September index dropped 5.6 points to 93.9 from the almost-neutral value of 99.5 registered in August. There was broad range of reasons which led to increased consumer pessimism with most of the components of the index falling.
Westpac’s chief economist, Bill Evans said he wasn’t surprised by the result. “We were somewhat puzzled by the surprise increase in the Index last month of 7.8% and there was always likely to be some correction this month. Of course the deluge of disturbing news around violent gyrations in both Australian and overseas equity markets, poor economic data from China, a disappointing report on Australia’s growth rate and the weakness in the Australian dollar were also likely to have unnerved households.”
Westpac still expects the RBA to maintain its steady rates policy through to the end of 2016. “The key to any decision to further cut rates, as expected by the financial markets, will be whether the Bank’s current forecast that the unemployment rate can stabilise around current levels proves sustainable.”