Pessimists slightly out-number optimists...So what?

The Westpac-MI consumer sentiment survey came out today. By my estimates, the average monthly volatility is over 5%. You can get a feel for this in the black line in the chart below, which is the monthly index value. If we look at the 3 month moving average, which is the blue line in my chart, the index value is 97.22. An index value of 100 means the number of optimists exactly equal the number of pessimists (the long-term historical average is about 102.5, which means there have usually been a slightly large number of optimists). 

So the question is this: with an economy in which circa 20% is generating around 15% per annum growth while the remaining 80% of sectors are growing at about 1% per annum, what would you expect to see in a numerical poll of consumer sentiment? Would you expect to see more pessimists than optimists? Maybe.

This is certainly one reason why the RBA has reservations about the weighting systems used in other economic surveys: they are not especially good proxies for the sources and composition of Australian economic growth. What is interesting from today's survey is that the index tracking the "time to buy a major household item" rose 4.3% to 128.4. TD Securities opine that this suggests "credit availability and interest rates aren't a hindrance to major purchases."