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Australian consumer sentiment slips in Feb as inflation bites -Breaking

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© Reuters. FILEPHOTO: A line of shoppers forms in front of a Sydney mall, Australia. December 17, 2020. REUTERS/Loren Elliott/File Photo

SYDNEY, (Reuters) – A gauge of Australian consumer sentiment dropped for a third consecutive month in February. Rising living costs such as petrol and rent hampered finances and overshadowed a decrease in coronavirus infections.

On Wednesday, the Westpac-Melbourne Institute Index of Consumer Sentiment fell 1.3% from January’s drop of 2.0%.

At 100.8 in February, the index fell 7.6%. This means that optimists are just slightly outnumbered by pessimists.

Bill Evans, Westpac’s chief economist said: “The most likely reasons for these high pressures on finances are Omicron related disruptions to earnings and activity at the beginning of the year; rising cost of living; or the prospect of rising rates.”

In the last two months alone, petrol prices have increased 15%. Supply bottlenecks and price increases in goods and new home construction have also pushed up costs. Tenants are also feeling less optimistic as rents have risen.

It was evident in the survey’s measurement of family finances. This fell 9.3% compared to a year ago, and the outlook for financial health over the next twelve months dropped 1.5%.

According to the survey, 0.3% of respondents felt it was time to purchase a household item. The index for ‘time to own a home’ fell 2.4%.

This contrasts with the slight improvement in economic outlook for next twelve months, which increased 2.5% following a sharp drop in January. Meanwhile, the outlook for next five years rose 1.5%.

Media speculation regarding a rise of interest rates at the Reserve Bank of Australia (RBA) saw the percentage of respondents who expected an increase of mortgage rates over 12 months climb to 66% in February from 55% the previous month.

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