As expected consumer sentiment and home lending have taken another lurch downwards, matching the slump in business confidence and conditions was revealed on Tuesday.
The Westpac-Melbourne Institute consumer sentiment index, released yeserday shows a 6.7% fall to 79 points, its lowest point since January 1992 and figures from the Australian Bureau of Statistics showed home lending at an eight year low.
The National Australia Bank’s June survey showed a similar fall in confidence and conditions in the business sector, with the bank warning the slide had a way to go.
The Westpac survey shows the pace of the fall in consumer sentiment has quickened: June saw a 5.6% drop, now it’s approaching 7%.
Westpac chief economist Bill Evans said the index was at its worst level since Australia began emerging from the recession of 1990-91.
The survey of 1,200 people was taken last week, when crude oil prices hit a record $US145.85 a barrel and petrol prices in major capital cities hit or topped $1.70 a litre.
Westpac’s Bill Evans put the larger slump down to publicity about petrol and oil prices, so if the fall in oil prices of the past two days of 5%, is sustained in coming weeks, and produces lower petrol prices, the August survey could show a slowing in the loss of confidence.
The survey showed that consumers are now very negative about the longer outlook: there was a sharp 15.5% fall to 62.9 points in the reading about expectations for economic conditions over the next 12 months.
Compared with July 2007, that reading has weakened by 51.1%.
And consumers are also just as gloomy about their financial position now, compared to a year ago: the slide was smaller – down 6.2% to a similar figure of 63.7 points.
And there’s also gloomy news from the home building industry. Last week’s figures from the Australian Bureau of Statistics showed a 6.5% fall in approvals for owner-occupied and other dwellings.
Today, housing finance figures showed a similar fall for the same month of May, an 8-year low.
The number of home loans, seasonally adjusted, dropped 7.9% in May, the lowest since June 2000. The May figure is down from 3% in April.
The fall was much worse than the market had been expecting.
The number of new mortgages hit a three-and-a-half year low and the purchases of newly built homes have been falling steadily for 11 months.
Loans for new homes lead the fall, plunging a seasonally adjusted 13.5% in May, followed by loans for existing homes, which dropped 8%. Loans for the construction of new homes dropped 5%.
The Consumer confidence survey showed a sharp fall in May, so in that respect it’s no wonder that it was a miserable month for the new and existing housing sectors. It points to further weakness in June and July housing activity.
The ABS said that in seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions fell 6.1%, with investment housing commitments down 6.8% and owner-occupied housing commitments off 5.7%.
According to the ABS’s analysis the total value of owner-occupied housing commitments (seasonally adjusted) fell 5.7% (or $766 million) in May 2008, following a revised decrease of 4.8% in April 2008.
"The decrease this month was due to falls in the purchase of established dwellings excluding refinancing (down $434 million or 5.6%), refinancing of established dwellings (down $218 million, 5.6%), construction of dwellings (down $60 million, 5.2%) and the purchase of new dwellings (down $55 million, 10.9%).
"The total value of investment housing commitments (seasonally adjusted) decreased 6.8% (down $403million) in May 2008 compared with April 2008, following a revised increase of 0.7% in April 2008.
"The decrease this month was due to falls in the purchase of dwellings by individuals for rent or resale (down $366 million or 7.9%) and the purchase of dwellings by others for rent or resale (down $111 million or 15.8%) while construction of dwellings for rent or resale rose (up $73 million or 12.0%)."
