Consumer confidence has dropped back to pre-election levels, although optimists still outnumber pessimists.

The widely watched Westpac – Melbourne Institute Index of Consumer Sentiment fell 1.7 per cent in January to 103.3 – a reading above 100 indicates that optimists outnumber pessimists.

Westpac’s chief economist Bill Evans says the seasonally adjusted fall reflects a smaller than usual “holiday effect” on the index this January.

“Typically the January survey shows a strong seasonal upward bias because of the ‘holiday effect’ and seasonal adjustment is important to gauge the underlying strength of the index – for example, over the last 5 years on a seasonally unadjusted basis the index has risen by an average of 5 per cent in January,” Mr Evans observed in the report.

“The unadjusted lift in January 2014 was a comparatively modest 2.5 per cent, emphasising the softish nature of the result.”

Mr Evans says people usually tune out from following news events over the holiday period, but it does appear that many households were worried by recent employment figures that showed a steep fall in full-time jobs.

“To the extent that respondents were aware of the announcements, the most important economic event was the release of the December jobs report which showed a shock loss of 22,600 jobs in the month,” he noted.

“This concern around jobs is confirmed with our sub-index on unemployment expectations.”

The sub-index on unemployment expectations rose a further 0.7 per cent following a 4.6 per cent jump in December, and is now 3.5 per cent higher than it was on average during 2013.

Mr Evans says consumers are also getting a little cooler on the housing market.

“Our index tracking views on ‘time to buy a dwelling’ was steady in January but is down 10.5 per cent from its peak in March 2013,” he added.

“We also saw a fall in the House Price Expectations Index of 2.2 per cent, although it remains 29 per cent above its level a year ago.”