Australia consumer sentiment suffers surprise dip in Dec

A measure of Australian consumer confidence pulled back in December as households fretted on the outlook for the economy and finances, ending three months of improvement and adding to the case for further cuts in interest rates.

The poll of 1,200 people by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment fell 4.1 percent in December to 100.00, unwinding much of November's 5.2 percent increase.

On December last year, the index was still up 5.6 percent.

"This is a very surprising result," said Westpac chief economist Bill Evans.

"It was reasonable to expect that the Index would respond quite positively to the rate cut the Reserve Bank delivered last week.

"The survey was conducted in a week when the Reserve Bank of Australia (RBA) cut interest rates a quarter point to 3 percent, matching record lows last touched during the global financial crisis.

"Evidence to date is that low rates are not generating much traction with households," he added.

"Hence there is likely to be a decision to further ease rates in February or March.

"Details of the survey showed respondents were worried about the economic outlook despite the cuts to rates.

The index of expectations for the economy in the next 12 months dropped 4.3 percent, while that for the next five years sagged 8.9 percent.

The index of family finances compared with a year ago fell back by 7.2 percent, but that for finances over the next 12 months picked up by 4.6 percent.

In a disappointing omen for Christmas sales, the survey's measure of whether it was a good time to buy a major household item fell 4.8 percent.

Yet lower rates did boost confidence around whether now is a good time to buy a house with that index up 1.9 percent to its highest level since September 2009.

... contd.

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