February Consumer Sentiment

Westpac – Melbourne Institute Consumer Sentiment Index
February 2010
Table 1: Consumer Sentiment Index
Feb Feb Jan Feb % change on % change on
2008 2009 2010 2010 Jan 2010 Feb 2009
Seasonally Adjusted* 97.4 85.8 120.1 117.0 -2.6 36.4
Trend** 96.4 87.1 117.0 118.6 1.4 36.2
See footnote below for discussion on the seasonal adjustment process.
Consumer The Westpac – Melbourne Institute Consumer Sentiment Index fell by 2.6 per cent in February to
sentiment 117.0 from 120.1 in January, reversing some of the positive gains made last month. Nevertheless, the
fell in index is 36.4 per cent higher than its value a year ago.
February
Four of the five component indices fell in February (see Table 2). The largest decrease was 5.4 per
… four cent recorded by the component index reflecting family finances vs a year ago, followed by a decrease
component of 4.6 per cent in the component index about family finances next 12 months. However, the
indices fell… component index reflecting economic conditions next five years rose by 1.6 per cent. Overall, the
current conditions index declined by 4.6 per cent, and the expectations index fell by 1.3 per cent.
Decreases in consumer sentiment since January were recorded in all groups disaggregated by
demographic characteristics, except for the one occupation group: paraprofessional and tradesperson
(see Table 3). Nonetheless, the consumer sentiment for all groups rose significantly when compared
to their values a year ago.
This month’s survey was conducted in the week which included the RBA decision to maintain the
official cash rate at 3.75 per cent. It would appear that consumers have factored in future rate rises.
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
Feb-04 Feb-06 Feb-08 Feb-10 Feb-04 Feb-06 Feb-08 Feb-10
_________________________________________________________________________________________________________
* 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.
© 2010 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
Page 1
Table 2: Consumer Sentiment Index – component questions (SA)
2008 2009 2010 2010 Jan 2010 Feb 2009
Family finances vs a year ago 91.3 83.5 95.8 90.6 -5.4 8.5
Family finances next 12 months 113.0 99.2 122.2 116.6 -4.6 17.5
Economic conditions next 12 months 85.0 53.8 127.0 126.0 -0.8 134.1
Economic conditions next 5 years 103.2 84.8 119.0 121.0 1.6 42.7
Good or bad time to buy major h’hold items 94.6 107.6 136.7 131.1 -4.1 21.8
Current Conditions Index* 92.9 95.6 116.2 110.8 -4.6 16.0
Expectations Index** 100.4 79.3 122.7 121.2 -1.3 52.9
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)

2008 2009 2010 2010 Jan 2010 Feb 2009
Gender Male 102.9 86.9 130.8 121.1 -7.4 39.4

Female 92.0 84.7 117.2 113.1 -3.5 33.5
By age 18-24 115.8 102.2 138.2 123.9 -10.4 21.3
25-44 98.9 89.6 129.1 119.8 -7.2 33.6
Over 45 91.7 79.0 116.3 113.1 -2.7 43.2
By home ownership Tenant 107.9 90.1 121.3 117.9 -2.8 30.8
Mortgagee 94.0 86.7 127.3 117.6 -7.6 35.6
Wholly owned 93.4 83.7 121.3 116.1 -4.3 38.7
By Fed. voting intention Coalition 94.7 82.4 120.5 115.1 -4.5 39.8
ALP 101.3 87.7 132.4 123.5 -6.7 40.8
By occupation Manager/prof. 99.9 92.1 129.3 118.2 -8.5 28.3
Paraprof./trades 100.1 89.1 124.0 125.6 1.3 40.9
Sales/clerical 103.3 85.6 126.5 118.3 -6.5 38.2
Lab./operator 104.2 88.2 131.9 113.8 -13.7 29.0
Not working 90.5 79.5 116.8 112.6 -3.6 41.7
By household income p.a. Up to $20K 87.4 79.8 107.4 106.0 -1.3 32.9
$20 to $40K 98.4 76.3 111.1 110.6 -0.5 45.0
$40 to $60K 94.0 88.2 121.9 111.1 -8.8 26.0
Over $60K 102.6 90.6 129.6 122.4 -5.6 35.2
By area Metropolitan 100.6 86.9 126.7 119.7 -5.5 37.7
Non- Metro. 93.0 83.7 117.6 111.6 -5.1 33.2
Page 2
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
2.4
17
12 100 100
1.4
7
0.4 2
-3 80 80
-0.6 -8
Retail sales growth (LHS) Trend SA
Quarterly change in consumer sentiment (RHS) -13
60 60
-1.6 -18
Feb-04 Feb-06 Feb-08 Feb-10
Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-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
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
*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.
Page 3
Chart 5: Current Conditions Index Chart 6: Expectations Index
Index Index
140

130
120
110
100
90
SA Trend SA Trend
70 80
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
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
Released: 10 February 2010 Coverage: persons 18 years and over, all states and the ACT.
Interview period: 1 – 7 February 2010 Stratified by gender, age and location.
Sample size: 1200
Page 4
Westpac – Melbourne Institute
Survey of Consumer Sentiment
The Westpac – Melbourne Institute Survey of Consumer Sentiment index has been designed as a trend-less variable that provides an indication of
the level of and shifts in consumer sentiment over time. The index is an average of five component indexes which in turn reflect the balance of
favourable and unfavourable responses to five survey questions. These questions relate to family finances a year ago and in the next 12 months,
economic conditions in the next 12 months and next 5 years, and good or bad time to buy major household items. An index level of 100 indicates
that the balance of confidence or optimism is equally weighted, while an index of greater than 100 indicates that optimists outnumber pessimists.
The consumer sentiment index has been found to be a good predictor of economic activity.
Disclaimer: Westpac Banking Corporation, the University of Melbourne and the Melbourne Institute give no representation, make no warranty,
nor take any responsibility as to the accuracy or completeness of any information contained herein and will not be liable in contract tort, for
negligence or for any loss or damage arising from reliance on any such information. The Westpac–Melbourne Institute Survey of Consumer
Sentiment report presents the results of a survey of more than 1200 households, together with the professional analysis and views of the
Melbourne Institute. These views and findings do not necessarily coincide with those of the Westpac Banking Corporation.
For information on the data contained in the report contact the Melbourne Institute, The University of Melbourne, on (03) 8344 2196.
 2010 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
This report is copyright. Apart from any fair dealing for the purposes of study, research, criticism or review, as permitted under the Copyright Act,
no part may be reproduced without written permission.
ISSN 1836-4217 (Online)
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Westpac – Melbourne Institute Consumer Sentiment Index

Chart 2: Current Conditions Index minus

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

Gender Male 102.9 86.9 130.8 121.1 -7.4 39.4

120 120 100 100

Optimists - pessimists +100

Optimists - pessimists +100

120 120 120 120

100 100 100 100

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

ISSN 1836-4217 (Online)

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