A subdued employment market and slower house price rises have left consumers feeling cautious, with consumer sentiment slumping to its lowest level in six months.

Consumer sentiment fell by 1.7 per cent from 105.0 in December to 103.3 in January, according to the Westpac Melbourne Institute Index of Consumer Sentiment.

“Today’s result is a mixed bag for the retail sector – a drop in confidence is never good news, however there are some bright spots for the retail sector in the year ahead as the index points to far more optimists than pessimists out there at the moment,” said Margy Osmond, CEO of Australian National Retailers’ Association (ANRA).

“A subdued employment market and slower house price rises have left consumers feeling cautious about spending this month and this is reflected in the falls across sub-indexes that track views on family finances (Family finances vs. a year ago fell 1.7 per cent and family finances next 12 months fell 2.4 per cent),” Osmond said.

“However, despite a slight drop in consumer confidence retailers are optimistic underlying momentum in areas such as ‘time to buy a major household item’ will deliver positive results for the sector in the first half of the year.

“’Time to buy a major household item’ is tracking 2.4 per cent ahead of where the index was 12 months ago – and continues to be the only index where optimists greatly outweigh pessimists (139.0 points).”