Consumer sentiment improves as inflation ebbs

With personal finance and the urge to buy automobiles and consumer durables heading north, consumer sentiment improved for the second consecutive month in February 2015 as the MNI consumer sentiment indicator rose to 121.2 in the month compared to 120.4 in the previous month.

According to the economy analytics firm, MNI, the rise in consumer sentiment over the past two months has been small but significant following the descent over the past year.

"While sentiment remains above the 100 breakeven level, meaning that optimists outnumber pessimists, it still lies below the series average of 123.3. It's also down 5.2 percent on the year", the firm said in a statement.

According to the company, the improvement in consumer sentiment was driven by increasing optimism on the current situation, with both "current personal finances and durable buying conditions rising".

The urge to purchase consumer durables, however, is still down more than 7 percent compared to February last year.

"Consumer sentiment is still down compared with a year ago but the good news is that the sustained downturn seen over the past year may have finally come to an end. A further fall in inflation expectations in February suggests the central bank has room to ease rates again over the coming months which should help to underpin sentiment", chief economist of the company Philip Uglow said.

The firm said the sharp reduction in inflation has provided greater confidence to consumers when managing their household monthly budget and provided a wealth effect. The January interest rate cut would also have helped and the March reduction should also feed through next month.