Consumer sentiment up, spruikers surging, it must bull
Consumer sentiment jumps, there’s a surge in advertising for get-rich-quick spruikers, the newsletter peddlers are turning from fear to greed – with the surge in bull, it really might be a bull market.
The February Westpac-Melbourne Institute consumer sentiment index published today is up a sharp 7.7 points to a healthy 108.3, its highest level in 26 months.
Maybe this rise is a little too sharp to mean as the demographic breakdown of the survey shows the biggest impetus came from those aged 18 to 24 (up 32 per cent), sales/clerical staff (also up 32 per cent) and those with a household income of between $20,000 and $40,000 (up 9.6 per cent). So poor, young shop assistants might be feeling chipper with the January sales behind them.
The Institute’s trend measurement smooths out the spike to show a more modest 1.4 per cent rise for a still-reasonable score of 104.5, up 6.5 per cent on this time last year. Fewer scary headlines about North Atlantic economic crises, lower interest rates, a rising stock market and some firmer housing prices seem to be doing their trick.
And there’s another harder-to-manage indicator of an outbreak of optimism: the get-rich-quick spruikers seem to be on the rise again and the tone of investment newsletter peddlers is changing from selling fear (“The market is about the crash and the economy is cactus”) to greed (10 top stocks to make you money”).
Yes, the real estate investment “seminars” are back, not that they ever really went away, and the art of telling newsletter subscribers what they want to hear, reinforcing existing emotions, means the emphasis is switching overnight from warnings about losing all your money to making it. It was only seven months ago that Alan Kohler wrote we were in a depression.
As if often the case when sentiment does turn, not all that much is fundamentally different. The North Atlantic crises have not been solved, they’re just being managed for the time being. China is growing nicely, but it was growing nicely enough last year when the Chicken Littles were panicking and claiming otherwise. Japan is a definite worry, economically and politically. The domestic labour market is still soft, will remain soft and unemployment is likely to continue to edge up a bit. While business confidence has improved, business conditions have not.
The only fundamental change is looser monetary policy – the Reserve Bank’s blunt weapon beginning to be felt – and the mysterious thing that is confidence itself.
It seems that no-one in Australia remembers what hard times are actually like as most seem to think we’re living in them now, except for young shop assistants who thought they were last month. A simplistic explanation for when a recession turns is when the 85 or 90 per cent of people with jobs decide they’re not likely to lose them. It’s a line that’s not without merit.
The end of the slide in housing prices makes possible the confidence required for people to buy housing, firming up prices. The stock market is not rallying because companies are markedly more profitable, but because the fear of prices falling has eased – and the RBA has made company dividends relatively more attractive.
The core of the alleged cost of living “crisis” – higher utilities bills – should taper off as well with the worst of the surge behind us and more people and governments waking up to its cause.
And, despite the best efforts of the squeaky wheels, populist journalism and politicians, there have been a couple of little surprises that fly in the face of some people’s personal experience and more general perceptions: employment in manufacturing and retail rose last year. You probably didn’t read about that.
Tucked away in Friday’s RBA statement on monetary policy was a graph showing employment movement in the key industries. Construction had a bad 2012, as did public servants, but manufacturing bottomed in 2011 and edged up last year. Retail and whole trade started 2012 badly but then steadily improved. The numbers aren’t big, but they were positive – they had stopped falling.
P.S. For followers of the fascinating split in consumer confidence by voting intentions, the gap between Labor and Coalition voters re-opened a little this month after a surprise narrowing in January. It’s nowhere near the chasm of July when the carbon tax started. Both sides gained in February – Coalition voters by 4.3 points to 105.4 and Labor voters by 9.1 to 123.8 – but it’s the improvement in coalition voters’ outlook that has made the big difference over the past year, a rise of 14.8 points. And they are more of them.
Michael Pascoe is a BusinessDay contributing editor.