Westpac Consumer Sentiment for March is out and rose another 2%, consolidating February’s big 7.7% break out. Bill Evans reckons:
This is a strong result. It follows the 7.7% jump in the Index which printed in February and marks the fifth consecutive month that the Index has registered above 100. That follows a period of 16 months when the Index was below 100 on 14 of those 16 months.
This is the highest level of the Index since December 2010 and it is up by 15.1% over the last year. Despite the Reserve Bank reducing its cash rate by 175 bp’s between November 2011 and December 2012 the Index averaged a modest 98 over the course of 2012. The rate cuts had been having limited impact on Consumer Confidence. However, in recent months we have seen the accumulation of the cuts appearing to be genuinely boosting confidence. Since October last year the Index has increased by 11.5%.
Equity markets and the associated signals that global economic prospects are improving are the other key driver of this improved confidence.
Interestingly, on savings and investment behaviour, there was a divergence:
Since December the ‘time to buy a dwelling’ Index increased by 1.6% from 142.2 in December to 144.5 in March. This Index is now up by 19.6% over the last 12 months. The “time to Buy a Car Index” is up 2.9% since December to be up by 16.7% over the year. Despite higher confidence and strong markets’ performance households remain cautious around their savings intentions. In December 39.8% of respondents favoured bank deposits or other fixed interest investments as the ‘wisest place for savings’. That proportion increased to 41.3% in March. On the other hand there was a fall in the proportion of respondents favouring real estate (24.0% down to 21.3%) and an increase in preference for shares from 6.3% to 8.6%. There has also been a steady decline in the proportion favouring ‘pay down debt’ which has fallen to 18% from 22.7% a year ago.
Perhaps the intoxication of cheap money is yet to push too many to take leave of their senses.
Er 20130313 Bull Consumer Sentiment
