Westpac Melbourne Institute Index of Consumer Sentiment rises to optimistic level in February

The Westpac Melbourne Institute Index of Consumer Sentiment for February rose by 4.2% to 101.3 after dropping in January by 3.5%. The index has risen above the level of 100, the optimistic level. The January's drop was mainly because of respondents' worry regarding the sharp declines in share markets and the oil price from the start of the year. In the four weeks to the end of this February survey, there has been small net movements in either oil price or share markets, although there considerable volatility seen.

The "average pump price" has declined by 8.5% since the survey in January, giving consumers a decent increase in disposable incomes. However, after the February survey closed on 6 February, there has been renewed weakness with the Australian share market, declining by almost 3%, and oil prices falling by 8%. The sub-indexes that track outlook for economic conditions in the next 12 months' declined 0.6%, while for the next five years, it increased by 4%.

Retail signals were positive with the 'time to buy a major household item' sub-index up by 3.1%. However, there has been a drop in respondents' confidence regarding the jobs market. In spite of the current strong employment reports and a noted declined in the jobless rate, the Westpac Melbourne Institute Index of Unemployment Expectations was up 1.9%.

Meanwhile, the housing index declined again in February by 12% to 99.3 after increasing by 14% in January. The index is 21% lower than its level one year ago. The House Price Expectations index dropped 12.5% in February after rising 20.5% in January. However, the index is still above its December lows.