SYDNEY, July 12 (Reuters) - A measure of Australian consumer sentiment edged barely higher in July after three months of falls and as pessimists continued to dominate despite signs elsewhere that economic conditions had turned for the better.
The survey of 1,200 people by the Melbourne Institute and Westpac Bank WBC.AX published Wednesday found consumer sentiment rose 0.4 percent in July, from June when it dropped 1.8 percent.
The index reading of 96.6 was 2.5 percent lower than in July last year and meant pessimists outnumbered optimists.
"The Index is not sending encouraging signals about the outlook for consumer spending," said Westpac chief economist, Bill Evans.
That was a significance divergence from increasingly upbeat polls of businesses. A NAB survey out on Tuesday showed firms felt conditions were the best since early 2008 with sales, profits and employment all strong.
Analysts note that, historically, business surveys have a far closer correlation to activity in the broader economy than do polls of the consumer mood, which can prove fickle from month to month.
Official data has shown retail sales rebounded in both April and May while employment has blown past all forecasts in recent months.
"The divergence between the household and business sectors continues," said NAB chief economist Alan Oster.
"That said, the retail industry is showing some signs of improvement, which along with better than expected employment growth, could mean the disparity will resolve itself in a favourable manner."
There were some promising signs on the July consumer survey with a measure of whether it was a good time to buy a major household item jumping 4.2 percent.
An index of family finances compared to a year ago rose 1.2 percent, while the economic outlook for the next 12 months added 1.8 percent.
On the downside, expectations for the economy over the next five years fell 1.5 percent and the outlook for family finances further out declined 4.2 percent.