Consumer sentiment hits lowest level since August

April 11, 2012

Consumer sentiment has fallen to its lowest level in eight months, a survey shows.

The Westpac/Melbourne Institute Consumer Sentiment Index fell by 1.6 per cent to 94.5 index points in April, from 96.1 points in March.

Westpac chief economist Bill Evans said he had not expected the negative sentiment which a lower reading suggested.

"This result comes as a mild surprise," he said.

"The index is now at its lowest level since August last year when consumers were very concerned about the global outlook and warnings from the Reserve Bank and most commentators that higher interest rates were imminent.

"With conditions in the global economy improving and commentators interpreting the Reserve Bank (of Australia) governor's latest statement as hinting strongly that rates are likely to be cut next month it seems surprising that households would have a negative reaction in April."

Mr Evans said people with mortgages appeared to have been spooked by the RBA's decision not to cut official rates at its April meeting, although commentary had suggested a cut next month was possible.

Borrowing confidence amongst mortgage holders fell 5.1 per cent, while tenants reported an increase in confidence of 7.4 per cent, and those who wholly owned their homes reported a fall of just 1.7 per cent.

Two of the five components of the survey fell in April, with the sub index tracking how consumers view the state of their family finances down 14.4 per cent, and the outlook for family finances over the next 12 months falling 4.1 per cent.

Mr Evans said these readings were of particular concern.

"Apart from the one observation in July 2008 when respondents were gripped with concerns over the Global Financial Crisis, and mortgage interest rates hit 9.6 per cent, the read in today's survey on their assessment of finances compared to a year ago is the lowest since the recession in the early 1990s," he said.

The sub index covering economic conditions over the next five years rose 1.5 per cent.

AAP

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