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AU Consumer Sentiment Improves for the Third Month Straight
Consumer sentiment in Australia is on the rise, with December 2018 marking an increase for the third month straight. Some economists believe consumer sentiment is a self-fulfilling statistic: If surveys show confidence is up, then all consumers will spend more freely. This doesn’t take away the power consumer sentiment figures have on sales figures, markets and economic policy. It's important that small business owners understand the index and how it could affect their businesses.
What Is Consumer Sentiment?
Consumer sentiment is a measure of the confidence consumers have about the economy and their own finances. It is very similar to consumer confidence, but it’s measured by a different group and asks slightly different questions. In Australia, consumer sentiment is measured by the Melbourne Institute as part of the Consumer Attitudes, Sentiments and Expectations in Australia Survey, or CASiE. The survey reaches about 1,200 households and produces data on a number of macroeconomic issues, including consumer sentiment.
Consumer sentiment and confidence guide investors in making investments, as well as politicians and economists in deciding economic policy. The index’s neutral point is 100; at that point, there are an equal number of optimistic and pessimistic opinions on the economy. If the index is above 100, it indicates that consumers are feeling confident about the economy.
What Affects Consumer Sentiment?
Consumer sentiment and consumer confidence can be affected by a range of things. The people surveyed are asked how they feel about the economy and their own personal financial situation, so anything that influences these factors may change the index. This includes wages, employment figures and interest rates.
Politics can have a big effect on the economy and consumer confidence. It’s no wonder, then, that consumer sentiment suffered a substantial drop in September following the leadership spill of late-August. With a new Prime Minister settled, numbers began to climb again.
Often, shifts in the price of non-discretionary goods affect consumer sentiment. When petrol or utility costs rise, consumers become concerned about their personal finances and aren’t willing to spend on non-essentials.
What Does It Mean for Your Business?
A U.S. survey indicates that 46 percent of small and medium business owners think consumer confidence is the most important indicator that impacts their business. That’s because consumer confidence is a strong indicator of how much people are willing to spend. High confidence equals more spending.
Many investors also look at consumer confidence before making decisions about their money. During periods of high consumer confidence, business investment increases. This means it may be easier for you to find an investor or get a loan. If you’re planning on selling your business, high consumer confidence may also help you market your business to prospective buyers.
Keep an eye on consumer sentiment as it can help you make decisions about marketing and brand management. It can also help you calculate the financial health of your business.
Take Advantage of High Sentiment
Economists usually recommend you look at long-term trends when it comes to consumer confidence, and despite September’s slump, Australia is generally on an upward trajectory. This is good for small businesses around the country.
But what happens when confidence shifts? It can lead to a decrease in sales and a loss of business. That’s why it’s important to take advantage of strong consumer sentiment. You can, of course, make hay while the consumer sun is shining, but you should also take the time to recession-proof your business.
Being proactive now can lead to less stress during slow times. Build a strong brand that people trust. If you provide quality products and superior service, customers will come to you even when confidence is low. If you become a necessity to customers, you’ll manage to come out of consumer confidence slumps with your business thriving.
Understanding consumer sentiment can help you make predictions about where your business is going. Keep an eye on the figures, but remember, good products and a strong brand will help you grow no matter what the survey says.
Contact one of our LINK Offices and speak with our expert team of brokers to help you buy or sell a business smoothly and confidentially.