FROM MACROBUSINESS The Westpac–Melbourne Institute Index of CONSUMER SENTIMENT DECLINED BY 0.7% YR ON YR IN MARCH from 100.2 in Feb to 99.5,
slipping into net pessimistic sub-100 territory for the ?rst time since May last year
The main them in early 2014 continues to be a sharp loss of con?dence in the economic outlook and escalating job-loss fears. The run of ‘bad news’ around the motor vehicle industry, Qantas etc has clearly rattled consumers.
? Additional questions this month on consumers’ news recall found very high readings for news on ‘business pro?tability’ and ‘employment’, with the latter the highest since we began running these questions in 1975. The news on both fronts was seen as negative
Updates on the ‘wisest place for savings’ question show a shift towards more risk averse attitudes between Dec and Mar. The main move was a 4ppt swing out of ‘equities’ and into ‘Westpac’s outstanding Red Book, the bible of consumer attitudes, for March is out and makes sobering reading for anyone with their eyes open. Here are the major points:pay down debt’. However, at 15%, the proportion nominating debt repayment is still well below the 20-25% readings sustained through 2008-12.
? The mix resulted in a 6.3pt rise in the Westpac Risk Aversion Index – our measure that combined these responses into a single gauge of risk aversion. Despite the rise, the Index continues to show a signi? cant easing in risk aversion since the start of last year.
? Our CSI± measure, which we favour as a guide to actual spending, recorded a 1.4% fall in Mar, following similar declines in Feb and Jan. The measure is broadly consistent with the pick up in spending seen since mid-2013 but suggests momentum is more likely to fade than accelerate The sub-index on ‘time to buy a major item’ declined 1.0% in Mar but remains well above its long-run average. Recent data releases show a" NOTABLE PICK-UP IN SPENDING ON MAJOR HOUSHOLD ITEMS", including furniture, appliances and small renovations
? The index tracking views on ‘time to buy a dwelling’ fell heavily in Mar, the 6.7% decline underscoring what now appears to be a turning point in Sep last year. The Index is now a touch below its long-run average and points to a ?attening in housing market activity by the middle of the year. Any cooling o? is likely to be apparent ?rst in NSW which led the initial decline in house purchase sentiment. ? The most alarming aspects of the consumer survey continue to be around jobs.
The Westpac Melbourne Institute Unemployment Expectations Index surged a further 5.5% in Mar to a new cycle high of 164.4. Job loss fears were already high but are now extreme, at levels only seen during the GFC and recessions. While some of this may be an over-reaction to the aforementioned negative news around speci?c industries, the intensity of job loss fears is such that it is likely to have a signi?cant bearing on ?nancial decisions near term
------------------------------------------------------------ FROM MACRO BUSINESS
New car sales stall-
The Australian Bureau of Statistics (ABS) has just released new motor vehicle sales for the month of February 2013, which registered a 0.1% seasonally adjusted rise over the month but a 3.5% decrease over the year (see next table). As shown in the next chart, overall new car sales peaked in the first quarter of 2013 and have since drifted downwards, with even sales of the once booming Sports Utility Vehicles (4WDs) slowing: ----------------------------------------------------
IRON ORE BREAK EVEN PRICE ANALYSIS - UBS ANALYSIS RIO - $US 44.00 FMG - $US 66.00 MGX - $US 76.00 AGO - $US 81.00
