February Consumer Sentiment Rebounds
Australian consumer sentiment rebounded in February, offsetting most of January’s post-Christmas decline. The lift was primarily driven by mortgage holding consumers, with most expecting interest rates to remain on hold, or drop.
According to the Westpac-Melbourne Institute, local consumer sentiment climbed 4.3% in February to 103.8.
The news follows a reading of 99.6 in January – the first time the index dipped into pessimistic territory since late 2017.
February’s results takes consumer sentiment into ‘cautiously optimistic’ territory.Westpac Senior Economist, Matthew Hassan, claims the improvement was largely influenced by the RBA’s recent shift in tone regarding interest rates.
“The survey was in the field over the week ended February 9”
“That week saw a significant shift from the RBA, with the governor giving a clear signal that the bank now has a more evenly balanced view on the next move on rates, compared to the ‘next move likely to be higher’ assessment that it maintained throughout 2018.”
Forecasts for interest rate cuts stem from weakening consumer spending, coupled with falling housing prices.
“In particular, the continued house-price correction, concentrated in Sydney and Melbourne, is impacting consumer expectations for house prices but so far appears to be having only limited spill-over effects on wider confidence,” remarks Mr Hassan.
According to Westpac-Melbourne Institute, views on family finances remain the ‘weak spot’ for consumer confidence, however, have improved since January.
The ‘finances vs a year ago’ sub-index notched a 5.6% lift – up from January’s 5.9% decline.
Local consumer attitudes towards major purchased remain subdued, however, have steadied in recent months.
The ‘time to buy a major household item’ sub-index climbed 0.3% in February, following a 1.3% decline in January.
The sub-index remains below average, indicating sluggish consumer spending growth as seen throughout 2018.
The Westpac-Melbourne Institute’s Unemployment Expectations Index – used to determine job
security sentiment – slipped 2.9% decline in February, reflecting more consumers expect unemployment to decline in the year ahead.
The index is at a seven year low of 120 – relatively unchanged from a year ago, but better than the long run average of 130.
Consumers in NSW and VIC remain the most confident about jobs, however, improvements are expected across mining states.
Further information is available on Westpac’s website here.