ASX opens higher as Commonwealth Bank jumps on earnings surprise

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Worries over inflation and rising interest rates weighed on consumer confidence, with the Westpac-Melbourne Institute consumer confidence index falling 1.3% to 100.8 in February from 102 ,2 in January.

Increased pressure on family finances offset a better assessment of the Australian economy.

The “economy, next 12 months” sub-index increased by 2.4% and the “economy, next 5 years” sub-index increased by 1.5%. However, both components of the index that measure respondents’ assessment of their finances have deteriorated.

The “finances vs. a year ago” sub-index fell 9.2%, reversing more than the surprise 7.5% rise in January, while the “finances, next 12 months” sub-index fell 1.5% to be down 4.3% since December.

“The most likely explanations for these elevated financial pressures relate to: the business and earnings disruptions related to Omicron at the start of the year; the rising cost of living; and the prospect of higher interest rates,” Westpac said.

Consumers also increasingly expect interest rates to rise. The proportion of respondents expecting mortgage rates to rise over the next 12 months has risen from 55% in January to 66% in February, with more than one in four consumers now expecting rates to rise by more than by one percentage point.

Westpac noted that consumers were encouraged by the drop in the official unemployment rate in December. The Westpac Melbourne Institute Unemployment Expectations Index fell 8.7% to 102.8. This is the second lowest (best reading) since February 2011, only surpassed by last November’s exceptional reading of 95.3.

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