Consumer sentiment is an important metric for all property investors to be familiar with. So what is it and why is it important to keep tabs on?
About Consumer Sentiment.
Consumer sentiment and business confidence are at an 11-year high in 2021 [1]. It is a useful economic indicator taking into consideration peoples feelings toward their current financial health, the short term health of the economy and long term economic prospects [2].
The data is an extremely important and leading indicator for property investors, given its ability to predict consumer spending patterns particularly relevant in industries where revenues are highly correlated with spending patterns.
When consumers are confident in their futures, they tend to spend money and drive economic growth higher. When consumers aren't confident, they tend to save rather than spend, in turn restricting economic growth.
These spending patterns can be useful predictors of everything from gross domestic product (GDP) growth to the effectiveness of monetary policy in combating low unemployment and inflation.
Information published about consumer behaviour, spending and savings patterns are often based on economic, social circumstances, and other key events.
At Meridian Australia, we utilise consumer sentiment data in our detailed due diligence process to assess house price growth historically, in the present and in the future.
The Current Consumer Sentiment In Australia.
With much speculation over consumer sentiment amid the pandemic and index point plunging during the 2020 lockdowns, it has been a surprising turn of events to see that in April 2021 economic growth and employment forecasts revised higher as consumer sentiment hit an 11-year high.
The availability of effective COVID-19 vaccines is a key reason for confidence at the moment [7].
In addition, with the vaccine rollout expected to be nearing completion by early 2022, and a flow-on of effect relieving the remainder of current restrictions on social distancing and travel, we can expect to see positive consumer sentiment continuing to rise.
Strong residential property price growth continues to give Australian consumers cause for financial optimism [5].
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The Next Steps
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Lauren Soderberg – Business Development Manager
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Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.
References
[1] Roy Morgan
[2] Investopedia
[3] Bloomberg
[5] Ibis World
[6] The Balance
[7] ABC