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Australian consumer confidence taps 19-month high

WBK

Australian consumer confidence improved substantially in November, reaching the highest level since 2011, a survey released on Wednesday by Westpac Banking Corp NYSE:WBK and the Melbourne Institute of Applied Economic and Social Research showed.

The Westpac Melbourne Institute Index of Consumer Sentiment increased by 5.2% to 104.3 in November, from 99.2 in October.

Readings below 100 indicate that more consumers are pessimistic than optimistic about the economy.

Westpac chief economist Bill Evans said the result for November was surprisingly strong.

“The index has reached its highest level since April 2011,” Mr. Evans said in a statement.

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“After a long 16-month period when it held below 100 for 14 of those months, we are finally starting to see that the Reserve Bank ‘s 150 bps of interest rate cuts are having an impact.”

However, he said that the index was still only 0.9 percent above its level of November 2011.

“In effect, the subsequent 125 bps of rate cuts have only really now been successful in holding the Index at that level which we reached in November last year,” he said.

Mr. Evans said the more likely explanation for the strong uplift in November was that consumers were becoming more comfortable with the global outlook and finally responding to the series of rate cuts.

He said all components of the index improved in November, with a rise of 11.1% on the sub-index measuring views on “family finances compared to a year ago,” and a rise of 1.3% on the sub-index tracking views on “expected family finances over the next 12 months.”

Australian consumers were also positive about economic conditions over the next 12 months and five years, with the relevant sub-indexes improving by 6% and 3.4%, respectively.

The sub-index tracking responses to “whether now is a good time to purchase a major household item” rose 5.1%.