After the flood of bad and negative news, a fall in consumer confidence for this month was to be expected’ what was slightly surprising is the reported fall was small — tiny, in fact, given the torrent of economic bad news both here and offshore.
According to the March survey of consumer confidence from Westpac and the Melbourne Institute, there was a dip to 85.6 points in January, from 85.8 points in February.
In view of the flow of news on the economy (worsening), jobs (ditto), higher petrol prices and no rate cut, that was slightly surprising.
But along with the NAB’s business confidence figures on Tuesday, confidence seems to be holding up at the moment (admittedly at, or near, recessionary levels), while business conditions and the outlook for jobs continues to worsen.
Building approvals have fallen, except for new homes as the first home buyers grants kick in; retail sales were stronger than expected in January and December as the stimulus package seemed to make shoppers spend more.
Housing finance figures for January out this morning supported the impact of the first home buyers building approvals, but went further.
The ABS said: “In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions increased 0.7%. Owner occupied housing commitments increased 2.3%, while investment housing commitments decreased 3.8%.”
So private buyers are enthusiastic, but investors remain cautious because they are finding it hard to get finance as the banks cut back their lending to the property sector, as they do when faced with rising unemployment.
And first home buyers are there in force: they are at an 18-year high according to the ABS, making up 26.5% of all owner occupied housing commitments in January.
Tuesday’s ANZ’s job ads figures for February told a gloomy story about the outlook for employment, as it has been doing for months now without much happening in the actual market. Sure, a net 84,000 jobs were lost in the year to January, but we have been waiting for more for months. That may happen this week.
Overall, the sentiment remains low and well in the area where pessimism outweighs optimism.
Consumer sentiment dipped in March amid ongoing fears about a recession and job losses.
In a statement, Westpac chief economist Bill Evans said the result was “surprisingly good” considering a flow of bad economic news from at home and abroad.
“Global economic conditions continued to deteriorate particularly with the surprisingly swift capitulation in Asia and news of the collapse of jobs in the US and a further 20% fall in US share prices,” Mr Evans said in a statement today.
Mr Evans said the small fall in sentiment could reflect a lagged response to positive developments in February.
Recall that despite the announcement of the government’s $42 billion fiscal stimulus package and the one per cent fall in mortgage rates the index actually fell by 9.6% in February.
At the time it appeared that job concerns and the global gloom had more than offset the positive initiatives coming from the fiscal and monetary authorities.
The index has fallen by only 3.4% over the last year compared to a fall of 23% in the year to March 2008.
However, it has settled at a level which is almost 15% below the long term average, and has hardly budged from its level in August 2008 prior to the Reserve Bank’s spectacular 400 basis point rate cut cycle.
Tomorrow we get what could be the start of a series of bad reports from the labour market with the national employment figures due out from the Australian Bureau of Statistics.
Perhaps the ANZ job ads report and whatever we learn tomorrow will tell us more about future confidence levels than the March survey. But it has been pretty resilient over the past few months.
My own figures bear this out Greg. Around 50% of people I surveyed this week saw Australia’s situation as little more than a minor recession then back to normal. Just 27% believed we were in for a major recession and only 2% a1930’s style depression. So, despite the Govt and the Media’s best efforts, there appears to be some work left to do in dampening the spirits of the Australian consumer. No doubt the latest short term fiscal stimulus should ensure they eventually get their way. Even the apparently sanguine public are unconvinced about the value of the stimulus packages according to my numbers, although I am sure they won’t say no to the cash.
In my view, increasing government spending simply transfers wealth from savers to spenders, substituting a short-run stimulus for long-run financial deterioration. Japan has used this approach for twelve years, and it hasn’t worked. The US has been using it for six months and it hasn’t worked there either. Brown in the UK has achieved even worse results. Slashing taxes absent government spending cuts is useless because the government has had to borrow the difference. Cutting government spending is a good thing, but politics will prevent its happening prior to a crisis. … Prior excesses have resulted in a lack of solutions to the deflation problem. Like the pain of withdrawal for a drug addict, the discomfort of credit addiction withdrawal cannot be avoided. Forcing a consumer to spend more is like giving a drug addict free drugs. You will eventually kill the patient. The time to have thought about avoiding system-wide deflation was years ago. Now it’s too late.