Australia | Jul 14 2010
By Rudi Filapek-Vandyck
It would have been logical to anticipate a jump higher in confidence among Australian consumers. After all, Keving Rudd has been replaced by Julia Gillard, daily news headlines and heavy lobbying regarding the RSPT have disappeared, the Reserve Bank has indicated it likes to remain on hold for as long as possible and hey, even the weather has improved since last month.
But we got an all-time record jump instead.
Economists at Westpac report their monthly Consumer Sentiment Index (together with Melbourne Institute) has recorded its biggest jump -ever- from comparable index levels. July saw the index jumping by 11.1% to 113.1 from 101.9 in June.
Needless to say, the improvement has taken Westpac economists by surprise. They recall the index saw a comparable surge in confidence in 2009 when households realised that Australia had avoided recession but, they add, one has to take into consideration that at that time the Index was recovering from a much lower level.
This means that July 2010 marks the strongest monthly increase in the Index from a base above the 100 level since records began in the mid–1970s. It also means the index is now back at its highest level since April.
All components of the index increased in July. The assessment of family finances today relative to a year ago rebounded 17.2% after a 17.7% slump in June. Expectations for family finances over the next 12 months rose by a more subdued 7.3% but had seen a milder fall in June. In a positive sign for retailers, consumers’ opinions on “whether now is a good time to buy major household items” rose 7.3%, more than reversing the 5.6% fall over the previous two months.
Also, the component of the Index assessing the economic outlook for the next 12 months rose 10% while the five year outlook surged 16.2% – consumers remain upbeat on the economy with both components still well above their long run averages.
The ‘Time to Buy a Dwelling’ Index surged 15.6% in July after a 7.3% rise in June. Despite this, Westpac economists the Index has only retraced about half of its slump since January and remains well below its historical average.”
