(Australian Associated Press)
Sharp losses on global financial markets has hit home for consumers, sending confidence to a four-month low.
Consumer confidence fell 3.5 per cent in January, according to the Westpac/Melbourne Institute index of consumer sentiment.
The index slumped to 97.3 points, indicating there are more pessimists about the economy than optimists.
It is the lowest confidence reading since September, but it’s still 4.3 per cent above levels from a year ago, Westpac chief economist Bill Evans said.
The New Year rout on financial markets has spooked consumers, he said.
“Over the two weeks to the end of the survey, the oil price has fallen by 20 per cent,” he said.
“The Australian share market has fallen by 7.6 per cent and the US market by eight per cent.”
China’s volatile share market has plunged by around 15 per cent since the beginning of 2016, which is partly behind the Australian dollar’s descent from 73 US cents to 69 US cents, Mr Evans said.
“Not surprisingly, these concerns have weighed most heavily on how respondents assess their own financial position,” he said.
Consumers’ view on their family finances dropped 9.4 per cent from a year ago to its lowest level since July 2015, the survey found.
The future also looks gloomy, with perceptions of economic conditions in the coming 12 months falling five per cent.
Mr Evans noted that the January results need to be treated with caution, as they are seasonally adjusted to account for the regular positive impacts of the holiday season.
Consumers were slightly more concerned about the outlook for the jobless rate in January, but there’s been a material improvement in attitudes to the labour market over the year, he said.
Meanwhile, the measure of whether consumers felt now was a good time to buy a home increased markedly, by 13.9 per cent.
“That is the highest reading for this index since May last year,” Mr Evans said.
“This print may be signalling some improving optimism in the housing market.”
While consumers may curb their spending in response to the current global uncertainty, Westpac expects interest rates to remain on hold in 2016.