The Westpac-Melbourne Institute Consumer Sentiment index in Australia rose +5.3% to 94.6 points in November 2024, improving for the second straight month and hitting the highest level in two and a half years as the outlook on the economy and finances finally turned optimistic.
Source: Goldman Sachs
Still, the index has now held below 100 for nearly three years, indicating pessimists continue to outnumber optimists. Nevertheless, key components of the index showed strong improvements: family finances compared to a year ago surged by +6.8%, while expectations for the next 12 months rose by +4.4%.
The unemployment expectations index also improved, -7.2% month on month (mom), to be at its lowest level in 19 months. On housing, expectations for house prices declined -2.1% mom, despite mortgage rate expectations falling -3.2% mom and to its lowest level since August 2012. Meanwhile, the “it’s time to buy a dwelling index” rose +11.3% mom and is now at its highest level since January 2022.
The economic outlook for the coming year jumped by +8.7%, and confidence in the five-year economic outlook rose by +6.5%. These gains were driven, in part, by easing concerns over future interest rate hikes. A senior economist at Westpac commented, “Consumers are feeling less pressure on their family finances, no longer worried about further interest rate rises, and are increasingly confident in the economic outlook.”
Turning to the business sector, NAB’s business confidence index climbed to +5 in October 2024 from -2 in September, marking the first positive reading in 3 months and reaching its highest level since January 2023, with notable improvements across most industries, except construction and retail.
Business conditions stayed unchanged (at +7), as sales rose slightly (+13 versus +12 in September), profitability remained steady (at +5), and employment intentions fell (-5 versus -3). By industry, conditions declined in mining and manufacturing but improved in wholesale, finance, business and property services, and retail sectors.
Labour cost growth eased, as did product price growth, but retail price growth picked up. Growth in input costs slowed, while forward orders increased (-3 versus -5). Capital expenditure eased slightly (+8 versus +9), amid a drop in capacity utilisation (82.5% vs 83.1%).
Source: GS, Haver Analytics
Source: GS, Haver Analytics
