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AU: Westpac-Melbourne Institute Index of Consumer Sentiment
| Actual | Previous | |
| Index Level | 90.5 | 92.9 |
Highlights
Australia's Westpac-Melbourne Institute index of consumer sentiment fell further in February, dropping 2.6 percent to 90.5 from 92.9 in January. This survey was conducted last week, just before and just after the Reserve Bank of Australia increased policy rates by 25 basis points. Those surveyed after the RBA decision were slightly less pessimistic than those surveyed before.
Respondents to the survey reported little change in their assessment of the outlook for the domestic economy and their personal finances over the next twelve months but are less confident about the five-year outlook for the economy. Respondents expect more rate increases over the next twelve months, with more than 80 percent expecting mortgage rates to rise and just over a third expecting them to go up by a full percentage point or more.
Definition
The Westpac-Melbourne Institute Index of Consumer Sentiment is based on a survey of 1,200 consumers on their assessment of short-term and long-term prospective economic conditions and their own financial circumstances. The survey is conducted early each month, usually just before and just after the Reserve Bank of Australia's monthly policy meeting.
Description
The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is on whether economic growth is too strong and leads to inflation.
Consumer spending is the largest part of economic activity, so markets always closely follow consumer behaviour and sentiment. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.