Australia | Nov 12 2009
By Rudi Filapek-Vandyck
Following on from earlier surveys (see “Oz Consumer Confidence More Sensitive To RBA Hikes”) it would appear the Australian consumer is turning a little less exuberant about the economic prospects in the months ahead.
The latest Westpac-Melbourne Institute survey into consumers’ unemployment and inflation expectations confirms the recent trend of overall optimism tapering off post two RBA rate hikes and a share market that has stopped advancing strongly.
According to the latest Westpac-MI survey results consumers’ unemployment expectations rose moderately in November, but the economists are quick in pointing out that after eight consecutive falls the rapid downtrend in the series since peaking in February continues.
The unemployment expectations index rose 2.8% in November to 115.52 after a 14.6% plunge previously, leaving the index 36.9% below its February peak.
Westpac economists report they prefer to assess this index via a smoothed trend deviation from its full history average as a guide for annual employment growth seven months ahead. This deviation measure fell (as it is smoothed) for the eighth consecutive month to minus 4.8% in November from a positive 0.7% in October, the lowest since February 2008.
With the deviation measure of unemployment expectations retaining that peak of March 2009, Westpac economists report the data remain consistent with their inhouse view that annual employment growth should trough in Q4 2009.
Consumers’ inflation expectations dipped in November to 3.2% after three consecutive months at 3.5%, the lowest since July. Nevertheless, the uptrend since March has continued, although at a slower pace than seen recently, the economists explain. Trend inflation expectations rose to 3.52% from 3.48% previously and 3.41% before that, the highest since October 2008.
The trend expectation of managers and professionals also rose at a slower pace, to 3.69% from 3.60% previously and 3.46% before that, also the highest since October 2008.
The economists report that, relative to last month, there was a 2.2ppt fall in the proportion responding “don’t know” to the survey, and a corresponding 2.0ppt rise in the proportion expecting prices to remain the same.
Also, while the proportion expecting prices to rise only edged 0.1ppts higher, within that group there was a 0.9ppt rise in those expecting 2% inflation and a 0.5ppt rise in those expecting 3%.
Consequently, reports Westpac, there was a solid 1.4ppt rise in the proportion expecting inflation within the 2% to 3% target band to 18.7%, the highest since March 2007, well above the twelve month average of 12.5%.