Australian Westpac consumer sentiment remains broadly unchanged in January

The Westpac Melbourne Institute Index of Consumer Sentiment rose by marginally 0.1 percent in January, from previous 97.3 to 97.4. Following December fall of 3.9 percent, the sentiment was little changed in January, moving marginally 0.1 percent higher. At 97.4, pessimists clearly outnumbered optimists for a second consecutive month in January (100 being the neutral point).

December and January are the weakest outcomes since April 2016, when the Index printed at 95.1. During the intervening seven months, the Index has averaged 101.5, aided by interest rate cuts from the RBA and, in May, a more favourable Federal Budget”, reported Westpac in its research report.

The absence of a rebound in January is a disappointing result, particularly when one factor in the cumulative 10 percent gain for Australian equities over the past two months and, to a lesser extent, a nascent improvement in the pace of job creation.

The Westpac in its press release mentioned that there are likely to be lingering effects from the shock of the announcement just before the December survey that the economy contracted by 0.5 percent. The components of the headline Index were volatile in January. ‘Economic conditions, next 12 months’ experienced a partial rebound from December’s 5.2 percent fall, rising 2.5 percent.

However, longer-term expectations deteriorated further, the ‘economic conditions, next five years’ sub-component falling a further 1.4 percent in January following the 2.5 percent fall in December. From their respective post-Budget peaks in May 2016, the short and long-term economic conditions sub-components are down almost 8 percent and 10 percent respectively.

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