Westpac – Melbourne Institute Consumer Sentiment Index

July 2009
Table 1: Consumer Sentiment Index
Jul Jul Jun Jul % change on % change on
2007 2008 2009 2009 Jun 2009 Jul 2008
Seasonally Adjusted* 120.8 79.0 100.1 109.4 9.3 38.5
Trend** 117.8 83.3 99.4 104.7 5.4 25.7
See footnote below for discussion on the seasonal adjustment process.

Consumer The Westpac – Melbourne Institute Consumer Sentiment Index increased by 9.3 per cent in July to
sentiment 109.4 from 100.1 in June. This is the second consecutive month that the index is above the 100 mark
rose in showing that optimists out-weigh pessimists compared to this time last year.
July
Four of the five component indexes rose in July (see Table 2) with the two largest increments of 19.6
…with per cent and 15.7 per cent, respectively, recorded by the indexes reflecting economic conditions in the
significant next 12 months and in the next 5 years. However, the index reflecting family finances vs a year ago
improvement declined slightly by 0.9 per cent. Overall, the expectations index increased by 12.0 per cent while the
in the index current conditions index rose by 5.1 per cent.
representing
economic Improvements in consumer sentiment were recorded in all groups disaggregated by demographic
conditions in characteristics (see Table 3) except for those with an annual income below $20K. Notable
the next 12 improvements of greater than 15 per cent were registered by respondents in the occupation group:
months labourer and operator, and in the household income group: $20K to $40K.

This month’s survey was conducted in the week where “Fair Work Australia” replaced “Work
Choices”. Interestingly, the sentiment of respondents who would vote for the ALP was above 100
while the sentiment of respondents who would vote for the Coalition was below 100.

Chart 2: Current Conditions Index minus

Chart 1: Consumer Sentiment Index Expectations Index***
Index Index
135 20
Optimists - pessimists +100

10
115

95
-10
SA Trend
75 -20
Jul-03 Jul-05 Jul-07 Jul-09 Jul-03 Jul-05 Jul-07 Jul-09

_________________________________________________________________________________________________________

* In June 2006 we moved to reporting seasonally unadjusted series after we conducted a series of tests on the data which indicated no statistical evidence
of seasonality. However, further research showed that the January monthly changes were, in general, significantly larger than the average monthly changes
for the rest of the year. Consequently, we have adopted a new methodology to filter the raw data for the regular large monthly movements in January. This
new filtered series is our new seasonally-adjusted (SA) CSI.
**Trend for the latest month is based on 2-month moving average while the rest are based on 3-month centred moving average.
***The difference between these two indices provides an indication of consumers’ perception of the state of the economy now and in the future. A
positive (negative) value implies that consumers view current conditions more (less) favorably compared to the future.

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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Table 2: Consumer Sentiment Index – component questions (SA)
Jul Jul Jun Jul % change on % change on
2007 2008 2009 2009 Jun 2009 Jul 2008
Family finances vs a year ago 102.4 63.7 82.4 81.7 -0.9 28.3
Family finances next 12 months 116.9 87.7 113.8 117.2 3.0 33.6
Economic conditions next 12 months 128.6 62.9 85.2 101.8 19.6 62.0
Economic conditions next 5 years 110.5 92.6 105.5 122.0 15.7 31.8
Good or bad time to buy major h’hold items 145.5 88.2 113.4 124.1 9.5 40.8
Current Conditions Index* 123.9 75.9 97.9 102.9 5.1 35.6
Expectations Index** 118.7 81.1 101.5 113.7 12.0 40.3
Percentage who reported that they were optimistic minus the percentage who reported that they were pessimistic plus 100.
*Average of the two component indices that relate to current conditions.
**Average of the three component indices that relate to expected conditions.

Table 3: Consumer Sentiment Index – by demographic characteristics (SA)

Jul Jul Jun Jul % change on % change on
2007 2008 2009 2009 Jun 2009 Jul 2008

Gender Male 125.6 82.4 102.2 115.1 12.6 39.7

Female 116.2 75.9 98.0 104.0 6.2 37.2
By age 18-24 122.4 94.8 103.7 116.6 12.5 22.9
25-44 124.2 77.3 102.0 112.2 9.9 45.1
Over 45 117.6 76.7 97.5 105.4 8.1 37.5
By home ownership Tenant 117.2 84.0 107.6 116.5 8.4 38.7
Mortgagee 123.6 76.1 101.1 109.6 8.4 44.1
Wholly owned 120.5 78.9 95.1 106.1 11.6 34.5
By Fed. voting intention Coalition 134.9 73.1 94.9 99.2 4.5 35.8
ALP 117.2 86.1 104.3 118.9 14.0 38.1
By occupation Manager/prof. 127.5 76.6 101.1 110.7 9.4 44.5
Paraprof./trades 123.2 77.2 97.0 110.5 14.0 43.1
Sales/clerical 125.0 82.8 109.0 110.4 1.3 33.3
Lab./operator 123.5 74.1 97.2 113.1 16.4 52.6
Not working 112.7 80.8 97.7 107.6 10.1 33.2
By household income p.a. Up to $20K 97.0 76.1 106.1 100.1 -5.7 31.5
$20 to $40K 118.7 78.3 96.0 111.0 15.7 41.7
$40 to $60K 126.0 83.3 96.2 107.9 12.1 29.6
Over $60K 129.7 78.5 101.9 111.0 8.9 41.4
By area Metropolitan 120.9 82.4 101.0 107.7 6.7 30.7
Non- Metro. 120.0 74.4 98.7 111.7 13.2 50.2

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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 Chart 3: Changes in Consumer Sentiment and Chart 4a: Family Finances Last 12 Months
Retail Sales Growth*
Index
% Seasonal adjusted, centred 3 month % change, 1 120 120
moving average, 03/04 prices quarter lead
3.4 12

7
2.4 100 100
2
1.4
-3
0.4 80 80
-8

-0.6 Retail sales growth (LHS) Trend SA

-13
Quarterly change in consumer sentiment (RHS)
60 60
-1.6 -18
Jul-03 Jul-05 Jul-07 Jul-09
Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09

Chart 4b: Family Finances Next 12 Months Chart 4c: Economic Conditions Next 12 Months
Index Index
140 140 140 140

120 120

120 120 100 100

80 80
100 100
60 Trend SA 60
Trend SA
40 40
80 80
Jul-03 Jul-05 Jul-07 Jul-09
Jul-03 Jul-05 Jul-07 Jul-09

Chart 4d: Economic Conditions Next 5 Years Chart 4e: Time to Buy Major Household Items
Index Index
140 140 160 160

140 140
120 120

120 120
100 100
100 100

80 80
80 80
Trend SA Trend SA

60 60 60 60
Jul-03 Jul-05 Jul-07 Jul-09 Jul-03 Jul-05 Jul-07 Jul-09

*Source: Original Retail Sales deflated by the Consumer Price Index - ABS Catalogue No. 8501.0, Retail Trade: Australia
and ABS Catalogue No. 6401.0, Consumer Price Index: Australia.

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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 Chart 5: Current Conditions Index Chart 6: Expectations Index
Index Index
140

130

Optimists - pessimists +100

Optimists - pessimists +100

120
110

100
90

SA Trend SA Trend
70 80
Jul-03 Jul-05 Jul-07 Jul-09 Jul-03 Jul-05 Jul-07 Jul-09

Chart 7a: Consumer Sentiment by Home Chart 7b: Consumer Sentiment by Income
Ownership (SA) Group (SA)
Index Index Index Index
140 140 140 140

120 120 120 120

100 100 100 100

80 80 80 80
Less than $20,000 $60,000+
Mortgage Home owner
60 60 60 60
Jul-03 Jul-05 Jul-07 Jul-09 Jul-03 Jul-05 Jul-07 Jul-09

Chart 7c: Consumer Sentiment Chart 7d: Consumer Sentiment by Voting

by Area (SA) Index Intention (SA) Index
Index Index 160 160
140 140

140 140
120 120

120 120
100 100
100 100

80 Metro 80
80 80
Non metropolitan Coalition ALP

60 60 60 60
Jul-03 Jul-05 Jul-07 Jul-09 Jul-03 Jul-05 Jul-07 Jul-09

Released: 8 Jul 2009 Coverage: persons 18 years and over, all states and the ACT.
Interview period: 29 Jun – 5 Jul 2009 Stratified by gender, age and location.
Sample size: 1200

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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