Consumer confidence is up, according to Westpac’s Melbourne Institute Index of Consumer Sentiment
Consumer confidence rose 7.7% in February to 108.3 points from 100.6 January – “the strongest sentiment reading since December 2010”, says Westpac’s Chief Economist, Bill Evans
All Index components recorded gains but the strongest lift in sentiment was around views on the economy.
The sub-index tracking consumer expectations for “economic conditions over the next 12 months” surged a massive 14.7%.
“The more positive February reading suggests lower interest rates may finally be starting to gain more traction with the consumer,” said Evans, who said sentiment may have been buoyed by a strong start to 2013 for financial markets.
However, confidence is still well below 2008-09 levels which saw readings of around 120.
February’s lift in sentiment is despite mixed influences including “surprisingly weak retail sales” and housing markets still in recovery, notes Westpac’s top economist.
“Consumer views on “time to buy a major household item” offered a more encouraging sign for Australia’s retailers,” said Evans, and were also very positive on house and car purchases.
However, views on “family finances vs a year ago” posted a “solid” 7.3% rise but remains at a weak level overall.
The longer term outlook also lifted with views on “economic conditions over the next 5 years” up almost 11%.
The Reserve Bank left interest rates unchanged at its February meeting but signalled it was prepared to lower rates further if necessary.
“We continue to see the case for lower rates as strong and expect the RBA to cut rates byanother 25bps at its March meeting” to take place on March 5, says Evans.