Consumer sentiment in the Australian economy declined for the first time in four months despite the country’s central bank reducing interest rates by 50 basis points to 4.25%.  According to the Westpac/Melbourne Institute’s Index of Consumer Sentiment, optimism in the Pacific economy dwindled – falling to a December reading of 94.7 or -8.3% for the month.  The recent reading falls below the brighter 103.4 witnessed in November and reverses a 6.3% increase in the previous month’s showing.

Additional declines were seen in the population of mortgage holders compared to non-mortgage holders – with a sentiment decline of 9.5%.

Notably, it seems that concerns over deepening troubles in Europe, coupled with a global slowdown, are hurting consumer optimism at year end – keeping Australian consumers away from stores.  This was witnessed in earlier reports of less than expected retail sales growth at the end of last month.  For the record, retail sales in the Australian economy expanded by 0.2% month over month compared to earlier estimates of a rosier 0.4% climb.  The lackluster sales volume has been compounded by lower business confidence in highlighting the drop in consumer confidence – which fell to the lowest level in five months.

The current environment is likely to spur further speculation that additional rate cuts will be forthcoming by the Reserve Bank of Australia next year.  The sentiment has led the Australian dollar lower against the greenback in the Asian trading session.  Currently trading at 1.0014, the currency fell to a low of 0.9992 on the heels of the release.