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The Westpac-Melbourne Institute Index of Consumer Sentiment rose 3.6% to 100 in August from 96.5 in July. Bill Evans, analyst at Westpac, provides a quick look on the Australian data released earlier today.

Key Quotes:

“Superficially this result comes as somewhat of a surprise given that the survey was conducted against a turbulent backdrop with global financial markets roiled by escalating trade tensions between the US and China, the ASX down 3.4% and the AUD off 3c US since the July survey.

However, the result does come in the aftermath of an unexpected 4.7% fall in the Index in June/July that came despite consecutive rate cuts from the RBA and the restoration of political certainty following the May Federal election.

At the time, particularly following the July fall of 4%, we speculated that households may have been unnerved by the unusual sequence of consecutive rate reductions, implying that there might be some alarming drop in confidence in official circles around the economic outlook.

Realising that lower rates are in the offing but that there is no need for further consecutive changes might be a more encouraging signal for households than a rapid sequence of rate cuts.

Indeed part of the gain is consistent with firming expectations for additional interest rate cuts. The RBA left rates on hold at its August meeting, pausing after the two cuts in June and July but retained a clear easing bias. The media and economic forecasters now expect a further lowering in the official cash rate in coming months.”