FED: Signs emerge of dipping consumer confidence over Xmas

AAP General News (Australia)
12-09-1998
FED: Signs emerge of dipping consumer confidence over Xmas

By Liz Rudall and Nhada Goodfellow

CANBERRA, Dec 9 AAP - Signs of a dip in consumer confidence emerged today despite last
weeks interest rate cut and a day ahead of employment figures expected to reveal a rising
jobless rate.

The Westpac Banking Corp/Melbourne Institute index of consumer sentiment suggested
confidence was faltering in December as family finances deteriorated and major household
purchases were put on hold.

The index fell by a seasonally adjusted 1.6 per cent in December.

But Westpac Banking Corp chief economist Nigel Stapledon said despite the surprising fall,
over the long term confidence was still rising, with consumers remaining relatively upbeat.

"The December reading is a little surprising, coming as it did after the Reserve Banks cut
in official interest rates," Mr Stapledon said in a statement.

"(But) in trend terms consumer sentiment has been rising for six consecutive months -
consumers still remain upbeat."

On December 2 the Reserve Bank of Australia cut official interest rates by a quarter of a
percentage point.

Mr Stapledon said consumers assessment of the current conditions was the major contributor
to the fall in sentiment.

Respondents were reporting deteriorating family finances over the past 12 months, and
saying it was a bad time to buy major household items.

Meanwhile, the Department of Employment, Workplace Relations and Small Business said today
its leading indicator, which predicts movements in unemployment, fell for the fifth month in a
row in October - due mainly to a decline in job vacancies.

And economists predicted the unemployment rate - due to be unveiled by the Australian
Bureau of Statistics tomorrow - would have risen slightly in November, after falling to an
eight-year low of 7.7 per cent, seasonally adjusted, in October.

Commonwealth Bank of Australia (CBA) senior economist Michael Blythe warned that "the
possibility of a weak November outcome cannot be ruled out".

He said the October federal election could have bolstered employment outcomes in recent
months, but this was not expected to have a major impact.

GIO Australia chief economist Akis Haralabopoulos said the employment outlook appeared
reasonable.

"The main leading indicators of employment continue to suggest that employment growth
through the rest of 1998 will remain respectable," he said.

But Mr Haralabopoulos said it was likely employment growth would slow from current rates
through 1999 as economic conditions eased.

Meanwhile, Bankers Trust Australia estimated unemployment would come in at 8.0 per cent,
with strong employment growth expected to keep a lid on the unemployment rate.

Colonial State Bank chief economist Craig James also forecast an unemployment rate for
November of 8.0 per cent.

AAP ear/ss/kr

KEYWORD: ECONOMY NIGHTLEAD

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