A spike in consumer confidence shows the impact interest rate stability has in improving the financial outlook for Australians, but may not result in higher retail sales, said Australian National Retailers Association (ANRA) CEO Margy Osmond.
The Westpac–Melbourne Institute Consumer Sentiment Index rose by 11.1 per cent in July to 113.1 from 101.9 in June.
Osmond said while consumer confidence and retail figures traditionally mirrored each other, since the global financial crisis this had not always been the case.
“We remain hopeful that the surge in consumer confidence correlates to a surge in buying at the shops, but it remains to be seen,” she said.
“The GFC had an impact on the way consumers spend as well, they are now less likely to put their hand in their pocket unless looking at a bargain or a sale.
“However, what is does tell us is that given a period of stability, with interest rates remaining on par the past few months, has a positive impact on consumers view of the economy and their security about spending,” she said.
Westpac's chief economist, Bill Evans, said he expected to see a bounce-back in the index after it had tumbled by 12.3 per cent since April.
“Another substantial fall would have put it in dangerous territory with a slide comparable to that seen entering the early 1990s recession and in 2007-08 prior to the global financial crisis,” he said.
“However we were surprised at the vigour of the bounce back. We saw a comparable surge in confidence in 2009 when households realised that Australia had avoided recession but at that time the index was recovering from a much lower level. This is the strongest monthly increase in the index from a base above the 100 level since records began in the mid-1970s."
The Westpac survey suggested consumers were positive about buying major household appliances, with a rise of 7.3%, reversing the 5.6% fall over the previous two months.
“Retail figures have been improving in the past few months, with slight rises recorded. The real test will come with the June figures – due out 3 August – which will be the first numbers reflecting stable interest rates, then we will have a real indication of the sector’s recovery from the GFC,” Osmond said.