Consumer sentiment to rein in economy

Research Fellow, Ms Caroline Veldhuizen, said, “Despite a stronger labour market in early 2008 than at the same time last year, consumer spending and business investment are weaker. Given the likelihood that interest rates will remain on hold in coming months, it is probable that consumer spending will remain weak and adversely affect business activity.”
“Although business conditions in the Central Coast were subdued in early 2008, trading in the three months to March was actually better than in 2007 and business expectations for capital expenditure in the next 12 months were higher, sounding one optimistic note in a relatively bleak outlook,” said Ms Veldhuizen.

Consumer confidence
In March 2008 consumer sentiment in the region was more negative than it has been in the last ten years when the Consumer Confidence index was first introduced.

Employment
Employment in the region in March 2008 was 139,700 compared with almost 130,000 in March 2005. Growth in employment was particularly strong during most of 2006, but weakened considerably during 2007. Unemployment in the region in March was 3.8% compared with the State average of 4.4%.
Youth unemployment, which has been a concern for some time, has shown a fall from 17.6% in 1996 to 15.2% in 2001 and 2006 to 13.5%.

Residential sales prices decline
While residential prices in NSW have shown an upturn since the end of 2005, on the Central Coast prices have been consistently falling for the past four years reflecting high real interest rates and constrained demand.

Residential building approvals
Over the past three years there have only been four quarters where there was an increase compared with the same quarter in the previous year. The CCRF suggests a generally contracting residential building sector, and this sector is a leading indicator of consumer demand. As this sector has considerable multiplier effects throughout the economy, this decline suggests the possibility of reduced employment, not only in construction, but also the diverse and numerous businesses supporting this sector. This is likely to have flow through effects affecting the whole regional economy. This data suggests the need and urgency for the Central Coast to broaden its industry base, particularly given the progressive reduction in land available for development in the Region.

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