Mortgage rate concerns abate.
Consumer sentiment recovered slightly after a shaky start to 2019, with the Westpac-Melbourne Institute Index of Consumer Sentiment rising 4.3% in February.
The previous survey in January had a sharp pull back, dipping into pessimistic territory for the first time since late 2017. The February lift takes the index back into ‘cautiously optimistic’ territory, Westpac senior economist, Matthew Hassan, said. “While that may indicate some of last month’s decline was holiday season noise, the survey detail suggests the Reserve Bank’s recent shift in tone on mortgage interest rates has played a part, he said.
“The week the survey was taken 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.
“Back in August, about half of Australians expected rates to rise over the next 12 months. The February survey also showed a strong 7.4% lift in sentiment amongst consumers with a mortgage, another indication that diminished rate rise fears have been a support.”
Consumer attitudes towards major purchases have been steadier in recent months but still remain subdued. The ‘time to buy a major household item’ sub-index rose just 0.3% in February, after dipping 1.3% in January. The sub-index remains below average, pointing to a continuation of the sluggish consumer spending growth seen through 2018.
Other factors likely to have negative impacts include an apparent slowdown in Australia’s economic growth, ongoing concerns around global trade wars, and political uncertainty ahead of the Federal election.
“Developments in the housing market continue to highlight downside risks to the outlook,” Hassan said.