Australia consumer confidence jumps to 20-month high in Feb

Shoppers walk past sales signs on display in the window of a retail store at a shopping mall in Sydney, Australia, Sept 4, 2018. Picture taken September 4, 2018. REUTERS/David Gray/File photo

SYDNEY  – Australian consumer sentiment rebounded to a 20-month high in February as a slowdown in inflation fueled hopes interest rates had finally peaked and boosted spending intentions, a survey showed on Tuesday.

The Westpac-Melbourne Institute index of consumer sentiment jumped 6.2 percent in February, from January when it fell 1.3 percent. The index reading of 86.0 showed pessimists still outnumbered optimists, much as it has for the past year or more.

Political partisanship was a notable feature of the survey as the confidence index among supporters of the Liberal National opposition slipped to 77.6, while that for supporters of the ruling Labor Party surged to 103.8.

“While sentiment is still firmly pessimistic there finally looks to be some light at the end of the tunnel for Australian consumers,” said Matthew Hassan, a senior economist at Westpac.

READ: Australian Dec consumer sentiment edges up, set for second worst year

“Moderating inflation and shifting expectations for interest rates appear to be the main factors behind the lift.”

Consumer price inflation slowed sharply to a two-year low of 4.1 percent in the December quarter, while the Reserve Bank of Australia (RBA) held rates at 4.35 percent at a policy meeting last week.

The central bank did leave the door open to another hike if needed, but markets are wagering the next move will be down, albeit not until later in the year.

The survey found the proportion of consumers expecting mortgage rates to rise in the next 12 months dropped to 42 percent, from 52 percent in January and 61 percent in December.

READ: Australia’s economy slows to a crawl, consumer spending surprisingly weak

This had a big impact on the index measuring whether it was a good time to buy major household items which climbed 11.3 percent in February.

The survey’s measure of family finances compared to a year earlier rose 4.9 percent, while the outlook for finances over the next 12 months gained 2.4 percent.

The outlook for the economy for the year ahead jumped 8.8 percent and the outlook for the next five years firmed 4.4 percent.

Consumers remained bullish on house prices with that index rising 2.1 percent to a new cycle high of 161.4