Consumer sentiment has improved in September by a “surprisingly strong” amount, but remains both low and precarious, Westpac (ASX:WBC) figures show.
The Westpac-Melbourne Institute Index of Consumer Sentiment grew 8.1% from the gloomy result of a month earlier.
Westpac chief economist Bill Evans attributed the improved sentiment to major banks lowering fixed rate mortgage rates, and general relief from concerns that interest rates would rise soon.
Household spirits would also have been lifted by widespread reports of improved economic growth during the June quarter, he said.
But the news is not all good. “Despite the surprisingly strong September rise, the Index remains at a weak level overall, reflecting the very weak starting point in August,” Evans said.
The index remains 14.4% lower than it was a year ago, and 14.8% below the average for 2010.
A snapshot of consumer attitudes to economic factors shows only opinions on interest rates were less negative than they had been three months ago. Attitudes to taxation as well as domestic and international economic conditions were all more downbeat.
Perceptions about employment conditions have also suffered.
“A year ago respondents were more positive on employment conditions than any other category with the exception of the booming Australian dollar,” Evans said. “In this survey, employment conditions are rated much more negatively than any other news category.”
Respondents also remain more concerned about the prospects for their own financial position than in any month during the GFC except July 2008.
Evans warned to expect more of the same going forward, as steady interest rates alone are not expected to be enough to overcome poor assessments of job security and financial prospects.
Westpac is predicting that the RBA will cut interest rates by 25 basis points in December.