Consumer Sentiment August 2009
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Westpac – Melbourne Institute Consumer Sentiment Index August 2009 Table 1: Consumer Sentiment Index
Seasonally Adjusted*
Aug 2007
Aug 2008
111.1
86.2
Jul 2009
Trend** 115.9 85.8 See footnote below for discussion on the seasonal adjustment process.
with 11.2 per cent increase in the index representing economic conditions in the next 12 months.
% change on Aug 2008
109.4
113.4
3.7
31.6
107.6
111.4
3.5
29.9
All the five component indices increased in August (see Table 2) with the component index reflecting economic conditions in the next 12 months posting the largest increment of 11.2 per cent. Four of the five component indexes are now significantly above the 100 mark; the exception is the index reflecting family finances vs a year ago which is still below 100. Overall, the expectations index rose by 4.8 per cent while the current conditions index rose by 1.8 per cent in August. Increases in consumer sentiment were recorded in most groups disaggregated by demographic characteristics (see Table 3); the exceptions were for the income group between $20K to $40K, the age group between 18 and 24, and the tenant category in the home ownership group. This month’s survey was conducted in the week where the ABS reported that the unemployment rate for July 2009 was unchanged from the 5.8 per cent reported in June. The RBA also noted in its ‘Statement on Monetary Policy’ that economic conditions in Australia were better than expected.
Chart 2: Current Conditions Index minus Expectations Index***
Chart 1: Consumer Sentiment Index Index Optimists - pessimists +100
20
115
95
SA 75 Aug-03
% change on Jul 2009
The Westpac – Melbourne Institute Consumer Sentiment Index rose by 3.7 per cent in August to 113.4 from 109.4 in July, further consolidating the positive gains made in the last two months.
Consumer sentiment Index rose to 113.4 in August
135
Aug 2009
Trend Aug-05
Aug-07
Aug-09
Index
10
0
-10
-20 Aug-03
Aug-05
Aug-07
Aug-09
_________________________________________________________________________________________________________ * In June 2006 we moved to reporting seasonally unadjusted series after we conducted a series of tests on the data which indicated no statistical evidence of seasonality. However, further research showed that the January monthly changes were, in general, significantly larger than the average monthly changes for the rest of the year. Consequently, we have adopted a new methodology to filter the raw data for the regular large monthly movements in January. This new filtered series is our new seasonally-adjusted (SA) CSI. **Trend for the latest month is based on 2-month moving average while the rest are based on 3-month centred moving average. ***The difference between these two indices provides an indication of consumers’ perception of the state of the economy now and in the future. A positive (negative) value implies that consumers view current conditions more (less) favorably compared to the future.
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 1
Table 2: Consumer Sentiment Index – component questions (SA) Aug 2007
Aug 2008
Jul 2009
Aug 2009
% change on Jul 2009
% change on Aug 2008
Family finances vs a year ago
99.3
75.1
81.7
82.8
1.3
10.2
Family finances next 12 months
112.4
102.6
117.2
121.1
3.3
18.1
Economic conditions next 12 months
116.1
72.2
101.8
113.3
11.2
56.9
Economic conditions next 5 years
104.0 123.5
89.2 91.8
122.0 124.1
123.1 126.9
0.9 2.2
38.1 38.2
111.4 110.8
83.5 88.0
102.9 113.7
104.8 119.2
1.8 4.8
25.6 35.5
Good or bad time to buy major h’hold items Current Conditions Index* Expectations Index**
Percentage who reported that they were optimistic minus the percentage who reported that they were pessimistic plus 100. *Average of the two component indices that relate to current conditions. **Average of the three component indices that relate to expected conditions. Table 3: Consumer Sentiment Index – by demographic characteristics (SA)
Gender By age
By home ownership
By Fed. voting intention By occupation
By household income p.a.
By area
Aug 2007
Aug 2008
Jul 2009
Aug 2009
% change on Jul 2009
% change on Aug 2008
Male
116.6
91.9
115.1
118.1
2.6
28.5
Female
105.8
80.6
104.0
108.9
4.6
35.2
18-24
121.8
108.7
116.6
110.9
-4.9
2.0
25-44
107.9
85.8
112.2
119.0
6.1
38.8
Over 45
111.0
81.4
105.4
109.4
3.7
34.3
Tenant
107.9
96.3
116.5
104.7
-10.2
8.7
Mortgagee
106.3
81.3
109.6
116.2
6.0
42.9
Wholly owned
114.5
86.4
106.1
114.0
7.4
32.0
Coalition
130.4
79.9
99.2
111.7
12.6
39.8
ALP
98.7
90.3
118.9
119.9
0.8
32.7
Manager/prof.
119.9
88.8
110.7
115.1
4.0
29.7
Paraprof./trades
105.1
88.1
110.5
113.8
3.0
29.3
Sales/clerical
108.0
81.4
110.4
110.8
0.4
36.1
Lab./operator
99.9
89.4
113.1
122.5
8.3
37.1
Not working
109.9
84.3
107.6
111.0
3.2
31.7
Up to $20K
102.3
84.6
100.1
110.8
10.7
31.0
$20 to $40K
97.1
83.7
111.0
99.9
-10.0
19.4
$40 to $60K
109.1
77.5
107.9
109.3
1.3
40.9
Over $60K
117.4
90.6
111.0
119.4
7.6
31.7
Metropolitan
111.4 110.7
85.3 87.9
107.7 111.7
112.8 115.1
4.8 3.0
32.3 30.9
Non- Metro.
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 2
Chart 3: Changes in Consumer Sentiment and Retail Sales Growth* % Seasonal adjusted, centred 3 month moving average, 03/04 prices
Chart 4a: Family Finances Last 12 Months 120
% change, 1 quarter lead
3.4
7
100
100
80
80
2
1.4
-3 0.4
-8
-0.6
Retail sales growth (LHS)
Trend
-13
Quarterly change in consumer sentiment (RHS)
-1.6
60 Aug-03
-18
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Index
140
120
120
100
100
80 Aug-05
140
Aug-07
Index
Aug-09
120
100
100
80
80
Trend
140
120
100
100
80
80
Aug-05
60
SA
40 Aug-03
SA Aug-07
Aug-05
Aug-07
40 Aug-09
Chart 4e: Time to Buy Major Household Items
120
60 Aug-03
140
120
Chart 4d: Economic Conditions Next 5 Years
Trend
60 Aug-09
Aug-07
SA
80 Aug-03
Aug-05
Index
60
Trend
SA
Chart 4c: Economic Conditions Next 12 Months
Chart 4b: Family Finances Next 12 Months
140
120
12
2.4
140
Index
60 Aug-09
160
Index
160
140
140
120
120
100
100
80 60 Aug-03
Trend Aug-05
80
SA Aug-07
60 Aug-09
*Source: Original Retail Sales deflated by the Consumer Price Index - ABS Catalogue No. 8501.0, Retail Trade: Australia and ABS Catalogue No. 6401.0, Consumer Price Index: Australia. © 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 3
Chart 5: Current Conditions Index
Chart 6: Expectations Index 140 Optimists - pessimists +100
130
110
90
SA 70 Aug-03
140
Index
Trend Aug-05
Aug-07
Aug-09
Chart 7a: Consumer Sentiment by Home Ownership (SA) Index Index
Optimists - pessimists +100
Index
120
100
SA
Trend
80 Aug-03
Aug-05
Aug-07
Aug-09
Chart 7b: Consumer Sentiment by Income Group (SA)
Index
Index
140
140
120
120
120
120
100
100
100
100
80
80
80
Mortgage 60 Aug-03
140
Aug-05
60 Aug-09
Chart 7c: Consumer Sentiment by Area (SA) Index Index
140
120
120
100
100
80
60 Aug-03
Metro Non metropolitan
Aug-05
80 Less than $20,000
Home owner Aug-07
Aug-07
Released: 12 August 2009 Interview period: 3 August – 9 August 2009 Sample size: 1200
80
60 Aug-09
60 Aug-03
160
140
Aug-05
$60,000+ 60 Aug-09
Aug-07
Chart 7d: Consumer Sentiment by Voting Intention (SA) Index
Index
160
140
140
120
120
100
100
80 60 Aug-03
Coalition
Aug-05
ALP
Aug-07
80 60 Aug-09
Coverage: persons 18 years and over, all states and the ACT. Stratified by gender, age and location.
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 4
Westpac – Melbourne Institute Survey of Consumer Sentiment
The Westpac – Melbourne Institute Survey of Consumer Sentiment index has been designed as a trend-less variable that provides an indication of the level of and shifts in consumer sentiment over time. The index is an average of five component indexes which in turn reflect the balance of favourable and unfavourable responses to five survey questions. These questions relate to family finances a year ago and in the next 12 months, economic conditions in the next 12 months and next 5 years, and good or bad time to buy major household items. An index level of 100 indicates that the balance of confidence or optimism is equally weighted, while an index of greater than 100 indicates that optimists outnumber pessimists. The consumer sentiment index has been found to be a good predictor of economic activity.
Disclaimer: Westpac Banking Corporation, the University of Melbourne and the Melbourne Institute give no representation, make no warranty, nor take any responsibility as to the accuracy or completeness of any information contained herein and will not be liable in contract tort, for negligence or for any loss or damage arising from reliance on any such information. The Westpac–Melbourne Institute Survey of Consumer Sentiment report presents the results of a survey of more than 1200 households, together with the professional analysis and views of the Melbourne Institute. These views and findings do not necessarily coincide with those of the Westpac Banking Corporation. For information on the data contained in the report contact the Melbourne Institute, The University of Melbourne, on (03) 8344 2196. © 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research This report is copyright. Apart from any fair dealing for the purposes of study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced without written permission.
ISSN 1836-4217 (Online)
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 5
Seasonally Adjusted*
Aug 2007
Aug 2008
111.1
86.2
Jul 2009
Trend** 115.9 85.8 See footnote below for discussion on the seasonal adjustment process.
with 11.2 per cent increase in the index representing economic conditions in the next 12 months.
% change on Aug 2008
109.4
113.4
3.7
31.6
107.6
111.4
3.5
29.9
All the five component indices increased in August (see Table 2) with the component index reflecting economic conditions in the next 12 months posting the largest increment of 11.2 per cent. Four of the five component indexes are now significantly above the 100 mark; the exception is the index reflecting family finances vs a year ago which is still below 100. Overall, the expectations index rose by 4.8 per cent while the current conditions index rose by 1.8 per cent in August. Increases in consumer sentiment were recorded in most groups disaggregated by demographic characteristics (see Table 3); the exceptions were for the income group between $20K to $40K, the age group between 18 and 24, and the tenant category in the home ownership group. This month’s survey was conducted in the week where the ABS reported that the unemployment rate for July 2009 was unchanged from the 5.8 per cent reported in June. The RBA also noted in its ‘Statement on Monetary Policy’ that economic conditions in Australia were better than expected.
Chart 2: Current Conditions Index minus Expectations Index***
Chart 1: Consumer Sentiment Index Index Optimists - pessimists +100
20
115
95
SA 75 Aug-03
% change on Jul 2009
The Westpac – Melbourne Institute Consumer Sentiment Index rose by 3.7 per cent in August to 113.4 from 109.4 in July, further consolidating the positive gains made in the last two months.
Consumer sentiment Index rose to 113.4 in August
135
Aug 2009
Trend Aug-05
Aug-07
Aug-09
Index
10
0
-10
-20 Aug-03
Aug-05
Aug-07
Aug-09
_________________________________________________________________________________________________________ * In June 2006 we moved to reporting seasonally unadjusted series after we conducted a series of tests on the data which indicated no statistical evidence of seasonality. However, further research showed that the January monthly changes were, in general, significantly larger than the average monthly changes for the rest of the year. Consequently, we have adopted a new methodology to filter the raw data for the regular large monthly movements in January. This new filtered series is our new seasonally-adjusted (SA) CSI. **Trend for the latest month is based on 2-month moving average while the rest are based on 3-month centred moving average. ***The difference between these two indices provides an indication of consumers’ perception of the state of the economy now and in the future. A positive (negative) value implies that consumers view current conditions more (less) favorably compared to the future.
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 1
Table 2: Consumer Sentiment Index – component questions (SA) Aug 2007
Aug 2008
Jul 2009
Aug 2009
% change on Jul 2009
% change on Aug 2008
Family finances vs a year ago
99.3
75.1
81.7
82.8
1.3
10.2
Family finances next 12 months
112.4
102.6
117.2
121.1
3.3
18.1
Economic conditions next 12 months
116.1
72.2
101.8
113.3
11.2
56.9
Economic conditions next 5 years
104.0 123.5
89.2 91.8
122.0 124.1
123.1 126.9
0.9 2.2
38.1 38.2
111.4 110.8
83.5 88.0
102.9 113.7
104.8 119.2
1.8 4.8
25.6 35.5
Good or bad time to buy major h’hold items Current Conditions Index* Expectations Index**
Percentage who reported that they were optimistic minus the percentage who reported that they were pessimistic plus 100. *Average of the two component indices that relate to current conditions. **Average of the three component indices that relate to expected conditions. Table 3: Consumer Sentiment Index – by demographic characteristics (SA)
Gender By age
By home ownership
By Fed. voting intention By occupation
By household income p.a.
By area
Aug 2007
Aug 2008
Jul 2009
Aug 2009
% change on Jul 2009
% change on Aug 2008
Male
116.6
91.9
115.1
118.1
2.6
28.5
Female
105.8
80.6
104.0
108.9
4.6
35.2
18-24
121.8
108.7
116.6
110.9
-4.9
2.0
25-44
107.9
85.8
112.2
119.0
6.1
38.8
Over 45
111.0
81.4
105.4
109.4
3.7
34.3
Tenant
107.9
96.3
116.5
104.7
-10.2
8.7
Mortgagee
106.3
81.3
109.6
116.2
6.0
42.9
Wholly owned
114.5
86.4
106.1
114.0
7.4
32.0
Coalition
130.4
79.9
99.2
111.7
12.6
39.8
ALP
98.7
90.3
118.9
119.9
0.8
32.7
Manager/prof.
119.9
88.8
110.7
115.1
4.0
29.7
Paraprof./trades
105.1
88.1
110.5
113.8
3.0
29.3
Sales/clerical
108.0
81.4
110.4
110.8
0.4
36.1
Lab./operator
99.9
89.4
113.1
122.5
8.3
37.1
Not working
109.9
84.3
107.6
111.0
3.2
31.7
Up to $20K
102.3
84.6
100.1
110.8
10.7
31.0
$20 to $40K
97.1
83.7
111.0
99.9
-10.0
19.4
$40 to $60K
109.1
77.5
107.9
109.3
1.3
40.9
Over $60K
117.4
90.6
111.0
119.4
7.6
31.7
Metropolitan
111.4 110.7
85.3 87.9
107.7 111.7
112.8 115.1
4.8 3.0
32.3 30.9
Non- Metro.
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 2
Chart 3: Changes in Consumer Sentiment and Retail Sales Growth* % Seasonal adjusted, centred 3 month moving average, 03/04 prices
Chart 4a: Family Finances Last 12 Months 120
% change, 1 quarter lead
3.4
7
100
100
80
80
2
1.4
-3 0.4
-8
-0.6
Retail sales growth (LHS)
Trend
-13
Quarterly change in consumer sentiment (RHS)
-1.6
60 Aug-03
-18
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Index
140
120
120
100
100
80 Aug-05
140
Aug-07
Index
Aug-09
120
100
100
80
80
Trend
140
120
100
100
80
80
Aug-05
60
SA
40 Aug-03
SA Aug-07
Aug-05
Aug-07
40 Aug-09
Chart 4e: Time to Buy Major Household Items
120
60 Aug-03
140
120
Chart 4d: Economic Conditions Next 5 Years
Trend
60 Aug-09
Aug-07
SA
80 Aug-03
Aug-05
Index
60
Trend
SA
Chart 4c: Economic Conditions Next 12 Months
Chart 4b: Family Finances Next 12 Months
140
120
12
2.4
140
Index
60 Aug-09
160
Index
160
140
140
120
120
100
100
80 60 Aug-03
Trend Aug-05
80
SA Aug-07
60 Aug-09
*Source: Original Retail Sales deflated by the Consumer Price Index - ABS Catalogue No. 8501.0, Retail Trade: Australia and ABS Catalogue No. 6401.0, Consumer Price Index: Australia. © 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 3
Chart 5: Current Conditions Index
Chart 6: Expectations Index 140 Optimists - pessimists +100
130
110
90
SA 70 Aug-03
140
Index
Trend Aug-05
Aug-07
Aug-09
Chart 7a: Consumer Sentiment by Home Ownership (SA) Index Index
Optimists - pessimists +100
Index
120
100
SA
Trend
80 Aug-03
Aug-05
Aug-07
Aug-09
Chart 7b: Consumer Sentiment by Income Group (SA)
Index
Index
140
140
120
120
120
120
100
100
100
100
80
80
80
Mortgage 60 Aug-03
140
Aug-05
60 Aug-09
Chart 7c: Consumer Sentiment by Area (SA) Index Index
140
120
120
100
100
80
60 Aug-03
Metro Non metropolitan
Aug-05
80 Less than $20,000
Home owner Aug-07
Aug-07
Released: 12 August 2009 Interview period: 3 August – 9 August 2009 Sample size: 1200
80
60 Aug-09
60 Aug-03
160
140
Aug-05
$60,000+ 60 Aug-09
Aug-07
Chart 7d: Consumer Sentiment by Voting Intention (SA) Index
Index
160
140
140
120
120
100
100
80 60 Aug-03
Coalition
Aug-05
ALP
Aug-07
80 60 Aug-09
Coverage: persons 18 years and over, all states and the ACT. Stratified by gender, age and location.
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 4
Westpac – Melbourne Institute Survey of Consumer Sentiment
The Westpac – Melbourne Institute Survey of Consumer Sentiment index has been designed as a trend-less variable that provides an indication of the level of and shifts in consumer sentiment over time. The index is an average of five component indexes which in turn reflect the balance of favourable and unfavourable responses to five survey questions. These questions relate to family finances a year ago and in the next 12 months, economic conditions in the next 12 months and next 5 years, and good or bad time to buy major household items. An index level of 100 indicates that the balance of confidence or optimism is equally weighted, while an index of greater than 100 indicates that optimists outnumber pessimists. The consumer sentiment index has been found to be a good predictor of economic activity.
Disclaimer: Westpac Banking Corporation, the University of Melbourne and the Melbourne Institute give no representation, make no warranty, nor take any responsibility as to the accuracy or completeness of any information contained herein and will not be liable in contract tort, for negligence or for any loss or damage arising from reliance on any such information. The Westpac–Melbourne Institute Survey of Consumer Sentiment report presents the results of a survey of more than 1200 households, together with the professional analysis and views of the Melbourne Institute. These views and findings do not necessarily coincide with those of the Westpac Banking Corporation. For information on the data contained in the report contact the Melbourne Institute, The University of Melbourne, on (03) 8344 2196. © 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research This report is copyright. Apart from any fair dealing for the purposes of study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced without written permission.
ISSN 1836-4217 (Online)
© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 5
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