Here’s some bad news for retailers counting on a Christmas spending splurge: consumer confidence is stuck in its longest slump since the global financial crisis.
Consumer confidence took a dive in the lead up to the federal budget in May and hasn’t recovered, the closely-watched Westpac/Melbourne Institute consumer sentiment index shows.
The survey shows the number of people pessimistic about the economy has outnumbered the optimists for nine months now.
To find another slump that long, you’d have to go back to the period following the 2008 global financial crisis and the early 1990s recession before it, according to Westpac.
Sentiment improved marginally in the past month, with the index rising 1.9 per cent to 96.6 in November, but that’s still more than 12 per cent lower than a year ago.
The Australian National Retailer’s Association said the result was disappointing, but it’s sticking with forecasts for a strong Christmas period.
Chief executive Anna McPhee said the figures weren’t what retailers were hoping for, but the increase in confidence in November was encouraging and retailers expected to increase sales by about six per cent this December.
“Whilst small, the ongoing improvement in sentiment is a hopeful sign consumers are starting to feel more confident again,” he said.
“Retailers continue to be optimistic about the way consumer confidence is tracking.”
But the Westpac figures had some more bad news for retailers – consumers expect to spend less on Christmas presents this year.
The proportion of people who believe now is a good time to buy a major household item has also fallen.
AMP chief economist Dr Shane Oliver said soft wage growth was another problem for retailers heading into Christmas, but could be offset by low interest rates and rising household wealth, which is partly a result of higher house prices.
Australian Bureau of Statistics figures released on Wednesday showing wages in the September quarter were only 2.6 per cent higher than a year ago.
“The combination of poor wages growth and consumer confidence are clearly not positive for retail sales going into the Christmas shopping season,” Dr Oliver said.
“That said, both have been subdued for a while now and haven’t stopped annual retail sales growth running at around 5.5-6.0 per cent this year as low interest rates and rising wealth levels are clearly offsetting the negative impact flowing from low wages growth and confidence.”
