Consumers appear to be convinced that the downturn is all but over, the Westpac Melbourne Institute consumer sentiment index jumping 3.7% in August, putting the index back at 2007 levels.
The rise extends an incredible jump in consumer sentiment over the last few months. The Index rose by 3.7% in August to 113.4 points and is now up an incredible 27.8% since May.
Westpac economic Matthew Hassan says it is the biggest three-month gain since the survey began in 1975.
“The message is clear: as far as consumers are concerned, the worst of the current downturn appears to have passed.”
Hassan says a big jump in the ABS house price index (up 4.2% in the June quarter) and steady unemployment data has helped to alleviate the big two fears for every household – losing a job and watching the value of their biggest asset plunge.
Lower petrol prices and a strong rise in the sharemarket have also helped to boost the spirits of consumers.
Hassan says it should also be noted that the sentiment index increased despite clear signals from the Reserve Bank that the next movement in official interest rates is up.
Westpac expects the RBA will leave rates on hold when it next meets on September 1, but predicts the bank will start raising rates in February 2010.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
