The Westpac-Melbourne Institute Index of Consumer Sentiment increased by 8.3 per cent in April, showing a return in confidence among consumers after some pleasing economic news.
The index grew from 85.6 in March to 92.7 in April. Bill Evans, Westpac chief economist commented that this was a surprisingly strong result especially after the index contracted by 0.2 per cent over the previous month.
“This month there has been more positive economic information. Concerns about the global economy have eased as share markets boomed. Both the US and Australian markets have risen by around 20 per cent. The Australian dollar was also up 11.6 per cent,” Evans said. “We have found that generally Australians respond positively to a rising Australian dollar.”
Evans also emphasised that the second government stimulus package is helping to encourage consumers.
“Anticipation of the cash payments is likely to be a key factor behind the surge in consumers’ assessments of their financial position,” he said.
“Media coverage of the imminent cash payments is likely to be having the desired impact on consumers’ expectations.”
It was also highlighted that expectations over the next 12 months increased by 16.9 per cent, but it was still 17.2 per cent below its level a year ago and almost 50 per cent below two years ago.
In addition the outlook for economic conditions over the next five years improved by 4 per cent, while opinions on whether now is a good time to buy a major household item increased by 3.1 per cent.
Despite these improvements, Evans was still hesitant about the economic future and warned that this rise does not necessarily mean an imminent recovery.
“It would be premature to argue that the index has passed its low in this cycle. We note that in the early stages of the last recession the index also appeared to have recovered from its lows.”