Despite consumer confidence rising, most of us are still pessimistic.
According to a poll by the Melbourne Institute and Westpac Bank, consumer sentiment rose 1% to 99.2 in October, following on from a 1.6% rise the previous month. A value under 100 shows that overall, we are still pessimistic about the economy improving. The index tracking expectations of economic conditions over the next 12 months, and the five year outlook both fell, compared to last month.
The poll was conducted in the week when the Reserve Bank of Australia (RBA) cut interest rates by 0.25%, but three of the four major banks passed on just 0.2% of that, while Australia and New Zealand Banking Group (ASX: ANZ) has yet to pass on anything. That may have contributed to some consumers still being less confident about the future.
The most encouraging result came from the index tracking views on time to buy a house, which jumped 9.6%, adding 17.9% in the last two months, and reaching its highest level since September 2009, which was in the midst of low interest rates and government stimulus. With economists forecasting the RBA will cut rates again in November, we could see another rise in the index next month.
That will come as welcome relief to the housing sector, which is reportedly in its worst state in 20 years. Construction and building companies, and housing product suppliers like GWA International (ASX: GWA), Brickworks Limited (ASX: BKW) and Reece Australia Limited (ASX: REH) will be hoping for a turnaround in their businesses. All three have been suffering since the GFC, with their share prices down at least 20% since October 2007, reflecting their business performance.
In a promising sign for retailers, the index measuring whether it was a good time to buy a major household item rose 3.7%.
The Foolish bottom line
Whatever the outlook, Foolish investors should ignore the noise, and focus on selecting high quality businesses that pay decent dividends and picking up those same stocks at a cheap price.
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Motley Fool writer/analyst Mike King doesn't own shares in any company mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
