CCI Survey of Consumer Confidence

Transcription

1 CCI Survey of Consumer Confidence March Quarter CCIWA economics@cciwa.com Chamber of Commerce and Industry of Western Australia (Inc)

2 Consumers are increasingly pessimistic about the short-term outlook for the Western Australian economy, with 31 per cent of consumers expecting the state s economy will deteriorate over the next three months Consumer confidence starts 2015 at a new low month 12-month Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 DConsumer confidence has dropped to fresh record lows in the first quarter of 2015 according to the latest CCI Survey of Consumer Confidence. The March quarter survey, which is the only survey of its kind in the State, canvassed the views of 400 adults, located across both metropolitan and regional WA. The results show that confidence has continued its downward trend in the first quarter of Consumers are increasingly pessimistic about the short-term outlook for the Western Australian economy, with 31 per cent of consumers expecting the state s economy will deteriorate over the next three months, up from 26 per cent in the December quarter. Consumers also remain pessimistic about the medium term outlook for the state s economy, with some 39 per cent of respondents predicting that the WA economy will perform poorly over the next 12 months up from the 38 per cent in December. The sharp drop in the three-month outlook for the WA economy comes as the index of job prospects hit an all-time low. Some 22 per cent of consumers reported that their ability to find work had declined compared to a year ago. Although this is a slight improvement from the 23 per cent reported in December, a higher proportion of consumers (nine per cent) now rank their job prospects as much worse when compared to last quarter (seven per cent), and a lower proportion of respondents (five per cent compared to eight per cent) report their job prospects as much better. Consumer sentiment towards job prospects has now been in negative territory for seven out of the past eight quarters. Despite uncertainty surrounding the WA economy, consumers still believe their financial position is better than a year ago which likely reflects the focus on reducing debt levels and increasing savings. In the March quarter, some 28 per cent of consumers reported that their financial position had improved over the past year, whilst 25 per cent reported that it worsened and approximately half of all respondents reported that it has stayed the same. These figures remain largely unchanged from the results reported in the December quarter. The feature question this quarter asked consumers to what extent various factors influenced their current perceptions of the WA economy. In line with previous surveys, concern about the high cost of living in WA was the number one factor weighing on the minds of WA consumers this quarter. Other factors, which were also of high concern, included current economic issues such as the depreciation in the Australian dollar and falling global oil price.

3 Job Prospects Compared to a Year Earlier, Index, 100 = Neutral Consumer attitudes regarding their job prospects in WA have reached an all-time low. Analysis shows that consumer confidence most closely follows changes in consumer perceptions of the jobs market, indicating this is a key measure for future consumer trends Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar Personal Finances Compared to a Year Earlier, Index, 100 = Neutral Despite sliding confidence in the WA economy, consumers continue to report a better financial position when compared to a year ago. Consumer s personal financial position has held up well, likely as a result of the Reserve Bank of Australia s decision to ease monetary policy in recent months Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

4 Consumer spending to remain subdued, as real wages fall in 2014 Weak wage growth in the WA economy is a reflection of challenging labour market conditions. TThe outlook for consumer spending in WA remains weak over the year ahead, in line with the decline in consumer confidence. A contributing factor has been the weakness in the labour market, which has impacted on household incomes. Last year, annual wage growth in WA slowed to 2.3 per cent, significantly down on the 4.8 per cent peak reached during 2012, and only slightly above the rate of inflation of two per cent. However, for much of 2014, inflation was higher than annual wage growth in WA, indicating that the real wages of WA households fell during this time. Weak wage growth has occurred in line with the transition in the local economy from the construction to the production phase of the resources boom. This has resulted in subdued labour demand in a range of industries that had seen strong employment growth in the five years to 2013, including mining, construction and utilities. A focus on productivity and controlling costs throughout the resources industry has placed downward pressure on wages. Over 2014, the WA unemployment rate increased 0.4 percentage points to reach 5.6 per cent, despite the creation of 55,000 new jobs. The industries that experienced the most notable decreases in jobs were mining (6,200) and manufacturing (8,600), with strong gains experienced in professional services (15,400) and recreational services (15,300). Despite the changing labour market and the impact it has had on wages, WA still has the lowest unemployment rate of all Australian states, and is lower than the national rate of 6.4 per cent. Weak wage growth and changing labour force dynamics had an effect on WA consumer spending in National accounts data shows that over 2014, household spending in WA grew by just 1.6 per cent. This was the slowest annual growth rate of all Australian jurisdictions, and the slowest rate of annual growth reported in WA since the Global Financial Crisis in Further reinforcing these subdued spending patterns is that for the first time since the September quarter 2001, year-on-year WA household spending on food items decreased, falling 0.4 per cent. Spending across item groups in 2014 was mixed, although weak consumer confidence was reflected through lower expenditure in some discretionary areas such as transport services (4.9 per cent), cigarettes and tobacco (8.3 per cent) and vehicle purchases (7.3 per cent). The item areas that experienced the largest spending increases were health (3.7 per cent), communications (4.7 per cent), financial services (5.9 per cent) and rent and other dwelling services (2.8 per cent). Meanwhile, lending statistics also suggest that WA consumers in 2014 were less inclined to borrow money to purchase luxury items. Over 2014, the number of fixed loans given in WA for the purchase of a motor vehicle or travel and holidays decreased by 6.9 per cent and 8.9 per cent, respectively.

5 6% 5% 4% 3% 6% 5% 4% 3% 2% 2% Wages 1% Inflation 1% 0% 0% Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Source: ABS Cat , The prolonged low levels of consumer confidence and reduced appetite to spend more also had an effect on WA retailers throughout Retail turnover grew by just 1.6 per cent across the state, which was well below the national average of 5.4 per cent. In a period of declining real wages, consumers have opted to spend less on dining out, with turnover in cafes and restaurants declining by 1.1 per cent in Turnover in electrical goods also fell in 2014, decreasing by 0.7 per cent. In addition the state s strong population growth rate has slowed. In September 2014, the population of WA was growing at a reported annual rate of 2.1 per cent, substantially down on the peak of 3.5 per cent experienced during The number of people moving to Western Australia from interstate and overseas has almost halved in the space of two years, falling from 17,680 in the September quarter 2012 to 10,735 in the recent data release. Significantly there were more people leaving WA than were arriving in the September quarter, the first time this has happened since June Subdued population growth and weak consumer demand have also been reflected in the housing market, with Perth property prices stalling in The median house price rose by just 1.2 per cent year-on-year. This represents the second lowest rate of property price growth of all Australian capital cities in 2014, with Darwin reporting the lowest at 0.8 per cent. Prices growth in the larger markets of Sydney, Melbourne and Brisbane was 12.2 per cent, 4.5 per cent and 5.3 per cent, respectively in The wealth effects associated with the slowdown of Perth property prices likely further influenced WA consumer sentiment, and spending, throughout In the latest Outlook, CCI forecast consumer spending to grow three per cent in and four per cent in In the next Outlook due for release in May, CCI will update its forecast taking into account new economic data released in 2015, which will likely see a downgrade of expectations in the near term.

6 Feature Question Factors influencing consumer confidence 10% 20% 30% 40% 50% Living Costs Falling Oil Prices Falling Australian Dollar Political environment Global economic news Domestic economic news Interest rates Personal finances Personal employment With 2015 now well underway, this quarter s feature question gained insight into the issues that are influencing consumers perceptions of the WA economy. Overall, living costs was once again the number one factor weighing on the minds of WA consumers for 47 per cent of respondents in the March quarter. This was slightly up from the 44 per cent reported in the December quarter. However, this represents only the second time in survey history that living costs have been a major concern to less than 50 per cent of all respondents, and is an indication that price pressures in WA have started to ease reflecting the changing dynamics of the state s economy. The falling Australian dollar and falling oil prices were the equal second most important issues influencing consumers in March, with 45 per cent of respondents reporting that these issues had affected their views of the WA economy to a major extent. People in regional areas of WA (38 per cent) are less likely to be influenced by the falling oil price when compared to consumers in the metropolitan region (47 per cent). The fourth highest ranked issue in the March quarter was the political environment, which was on the minds of 39 per cent of respondents, an increase from the 32 per cent reported in the December quarter - reflecting recent leadership speculation in Canberra, and ongoing budget challenges for Commonwealth and State Governments. Global and domestic economic news were reported as the fifth and sixth most influential issues in the March quarter, with around one third of respondents reporting that these issues were a major influence on their perception of the WA economy. With the RBA reducing the official cash rate to a record low, interest rates are having a more significant impact on consumer sentiment. Some 32 per cent of respondents in the March quarter reported that interest rates influenced their perceptions of the WA economy to a major extent, which is a large increase from the 22 per cent reported in December.

7 The falling Australian dollar and falling oil prices were the equal second most important issues influencing consumers in March, with 45 per cent of respondents reporting that these issues had influenced their perceptions of the WA economy

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