2/14/2012 10:09 PM ET
(RTTNews) - Confidence among Australian consumers increased in February, a key survey revealed Wednesday. However, taking into consideration the last three days of the survey when the central bank disappointed consumers by refraining from another rate cut, sentiment was relatively weaker.
The Westpac-Melbourne Institute Index of Consumer Sentiment increased 4.2 percent in February to 101.1 from 97.1 in January. The index is now 4 percent above that benchmark, but 5.2 percent lower than a year earlier.
"On the face of it, this is a strong result and provides some lagged recognition from consumers of the two rate cuts which the Reserve Bank and the commercial banks delivered to mortgage and business borrowers in November and December," Westpac's Chief Economist Bill Evans said.
During the survey period between February 6 and 10, households were strongly optimistic that the Reserve Bank was about to cut interest rates for a third time. Respondents were likely buoyed by the prospect of even lower mortgage rates.
However, the last three days of the survey were marked by "disappointment" that the Reserve Bank had not cut rates and also by speculation in the media that the bank was likely to be on hold for the foreseeable future. They also anticipated commercial banks to actually raise rates during the last days of the survey.
According to the survey report, the factors that would have clearly supported an increase in confidence were news on the international scene and a jump in the currency.
All components of the index increased in February. Households' assessment of their family finances as well as their expectations for the next 12 months improved during the month. Expectations for the general economy were also higher than the previous survey.
Spending intentions also firmed up with the sub-index tracking views on 'whether now is a good time to buy a major household item' up 1.8 percent. The Australian Bureau of Statistics said Wednesday that new motor vehicles sales in the country increased 1.3 percent month-on-month to 85,624 units in January.
The central bank last week trimmed the economic growth outlook to 3.5 percent for the year ending June 2012, reflecting weaker outlook for global economic growth. However, the central bank noted that the improved inflation outlook provided scope for easier monetary policy, should demand conditions weaken materially.
by RTT Staff Writer
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