In very surprising news the Westpac Melbourne Institute consumer sentiment index has increased by almost 10 per cent in July.
The index grew by 9.3 per cent from 100.1 in June to 109.4 in July, Westpac chief economist, Bill Evans was stunned by the announcement.
“This is unquestionably a stunning result. My personal view had been that given that last month we saw the second largest increase in the Index since we started measuring the Index in 1974 any rise in July would have been a great result,” he said.
Evans emphasised that the index is now at the highest level since December 2007.
“It is 38.5 per cent above a year ago and at 109.4, optimists decisively out-number pessimists for the first time since December 2007,” he said.
“This rise is despite no boost from the traditional drivers of confidence – petrol prices actually increased by 3.6%; the Reserve Bank left rates on hold in June despite it maintaining its easing bias; we even saw one bank modestly raising mortgage rates despite no rate change from the Reserve Bank.”
The dramatic rise in June figures was credited towards the news that Australia had missed a recession and Evans said that this news was likely to still have played a role this month, but other drivers could have also played a factor.
Government stimulus packages are still playing a key role in consumers spending habits, as well as the resilience of employment figures throughout the month. But Evans warned that confidence may drop when the effects of the handouts wear off and unemployment rises.
But for this month it was all good news with four out of five components of the index increasing.
Expected economic conditions over the next 12 months increased by 19.6 per cent, expected economic conditions over the next five years increased by 15.7 per cent, family finances over the next 12 months increased by 3 per cent, whether now is a good time to buy a household item grew by 9.5 per cent and family finances compared to a year ago was the only negative with a drop of 0.9 per cent.