Concerns about inflation and rising interest rates have weighed on consumer sentiment, according to Westpac.
The Westpac-Melbourne Institute Index of consumer sentiment fell by 1.3 per cent to 100.8 in February, from 102.2 in January.
Increased pressure on family finances offset an improved assessment of Australia’s economy.
The ‘economy, next 12 months’ sub-index increased by 2.4 per cent and the ‘economy, next 5 years’ sub-index was up by 1.5 per cent. However, both components of the index that measure respondents’ assessments of their finances deteriorated.
The ‘finances vs a year ago’ sub-index slumped by 9.2 per cent, more than reversing the surprise 7.5 per cent lift in January, while the ‘finances, next 12 months’ sub-index fell by 1.5 per cent to be down by 4.3 per cent since December.
“The most likely explanations for these elevated pressures on finances relate to: Omicron-related disruptions to activity and earnings at the start of the year; the rising cost of living; and the prospect of rising interest rates,” Westpac said.
There is also a firming expectation among consumers that interest rates are set to rise. The proportion of respondents expecting an increase in mortgage rates over the next 12 months lifted from 55 per cent in January to 66 per cent in February with over one in four consumers now expecting rates to rise by more than a percentage point.
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