The not so sentimental consumer

The not so sentimental consumer

Wed, 12 Feb 2014 | Stephen Koukoulas

The Westpac measure of consumer sentiment dipped 3 points in February, to be back, more or less, to neutral. That is to say, consumers are neither optimistic nor pessimistic about the future.

While it is never possible to pin-point why consumers are happy or sad, the timing of the survey coincided with fires, SPC Ardmona, heat, an emerging market inspired drop in stocks and of course, some talk that the next move in interest rates might be up. The government also took the odd step of talking down the economy, inflaming the budget 'crisis' again and the need for spending cuts which, no doubt, is dampening sentiment.

Whatever the reason for the 3 point drop in sentiment, there remains a reasonable correlation between consumer spending and sentiment, which suggests the strong lift in retail spending in the latter part of 2013 could ease off early in 2014. Let's see then next month or two of sentiment indicators before throwing in the towel on the growth pick-up story.

That said, the other facts remain about a booming export sector, a surge in housing construction, higher commodity prices and inflation pressures at the consumer level as well as in housing.

Will be fascinating to see which way the balance of good data versus neutral data versus bad data swings.

More in this category: « The economy and markets in 2014 More facts behind the Howard Government's debt elimination »

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