The Westpac-Melbourne Institute Index of Consumer Sentiment increased 1.9% in February recouping around half the loss seen in January.
Westpac chief economist, Bill Evans said while December hit a 10 year high the bounce-back in February signals that consumers remain extraordinarily confident. “And high confidence amongst consumers is critically important for the economy at this juncture,” Evans said.
Assessments of finances however were mixed with the ‘finances, next 12 months’ sub-index lifting 2.6% while the ‘finances compared to a year ago’ sub index was down 0.6%. The sub-index tracking attitudes towards purchasing ‘a major household item’ improved slightly by 0.4%.
According to Evans, with the Federal Government scheduled to phase out the JobKeeper program at the end of March it was vital that households, which have built up a very large financial buffer through the pandemic, are prepared to use that buffer to partially offset the impact on the economy of the withdrawal of support programs.
“The management of the pandemic locally has had a constructive effect on confidence and the success of contact tracing and ‘light-handed’ lockdowns has been important in containing a worrying cluster of cases since the last survey in January.”
The overall Index is now 14.2% above its pre-pandemic level in February 2020, but not all age groups have rallied with sentiment amongst respondents in the 18–24 age group falling 2.3%. In the 25–44 age group, confidence lifted 20.8%; and in the over 45’s increased 13.7%.
“Part of this under-performance from the younger age group may reflect a less enthusiastic response to the vaccine and the survey detail also suggests this younger age group has had a more difficult time financially,” Evans said.
The survey into the housing market showed the ‘time to buy a dwelling’ index fell 3.1% and is now 8.6% below its peak in November, a measure that tends to reflect shifts in housing affordability. The decline in recent months suggests recent increases in house prices may already be starting to weigh on the purchasing sentiment.