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Consumer confidence has risen slightly (up 2.9 per cent to 82) in October, but consumers are cautious of potential rate rises within the next year, according to the Westpac-Melbourne Institute Index of Consumer Sentiment.
In its October Consumer Sentiment Bulletin, which was conducted over 2–5 October, the major bank found that despite the index increasing to 82, sentiment was still “in deeply pessimistic territory”.
However, the report found that the “faint glimmers of hope” in consumer confidence were being “overshadowed by still-high inflation and renewed rate rise concerns”.
It found that the proportion of consumers expecting mortgage interest rates to rise over the next year, jumped up from 52.3 per cent in September to 63 per cent in the October survey.
Speaking when releasing the report yesterday (10 October), Westpac Group senior economist Matthew Hassan commented: “Some of the increase in this expectation likely relates to the surprise jump in the monthly CPI indicator, which showed annual inflation moving back above 5 per cent in August.”
Furthermore, the index found a drop in positivity about rate cuts over the next year, as the expectation of a possible rate cut fell to 7 per cent, down from 15 per cent in September.
The research from Westpac and the Melbourne Institute also revealed that the sub-index of “time to buy a dwelling” grew 4.8 per cent in October. However, as the index for this remained at 76, it remains at extremely low levels compared to the historical average (121.2).
Mr Hassan added: “Consumers remain less upbeat about near-term prospects for the economy. The ‘economic outlook, next 12 months’ sub-index dipped 0.2 per cent to 78.3.
“The medium-term view is less pessimistic though: the economic outlook, next five years sub-index is up 2.1 per cent to 92.4, in line with the long-run average of 92. This suggests consumers remain confident that the current cost-of-living problems will eventually be brought under control.
“While the RBA may need to revise its near-term forecasts for headline inflation up, on its own this will probably not be enough to trigger a further rate rise. If, however, there are further surprises in the September quarter CPI, due October 23, the next few meetings could be a little more live than the one in October.”
Similarly, the weekly ANZ-Roy Morgan Australian Consumer Confidence research (for 2–8 October), also released yesterday (10 October), revealed a slight growth in consumer confidence. However, it remained “in weak territory”.
The index rose 1.9 points to 80.1 points, which ANZ said was the strongest result since the last week of February.
ANZ senior economist Adelaide Timbrell commented that the “index is trending up and reached its highest level since the last week of February, though is still in weak territory”.
She added that the upward trend could also “reflect wage and employment growth over the last year, which have offset some effects of inflation and higher rates for many households”.
[Related: Consumer confidence hits lowest monthly average since 1990]
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