Australian consumers have spotted some light at the end of the tunnel at the same time as the economic slowdown finally catches up with businesses.
Consumers have been deeply pessimistic for months as interest rates rose and the high cost of living eroded household balance sheets.
But the clouds are starting to part, with the Westpac and Melbourne Institute monthly survey hitting a 20-month high of 86, well above the 78.5 reading recorded this time last year.
While improving, the mood remained subdued in February, with all components of the index still below the 100 neutral mark.
Westpac senior economist Matthew Hassan said cooing inflation and the shifting narrative on interest rates - towards the timing of cuts - was likely fuelling the confidence turnaround.
Yet the Reserve Bank's caution to declare the inflation fight over and decision to keep the possibility of more interest rate hikes alive has likely kept consumers wary.
"Responses over the course of the survey week suggest the rally is still very tentative with a sharp pull-back amongst those surveyed after the RBA's February policy decision," Mr Hassan said.
The stage three tax cuts may also be showing up in the monthly survey results, though this was concentrated in the middle income bands who are now in line for more tax relief.
In the business sector, a separate survey by the National Australia Bank suggests confidence is still low and conditions have dipped below their long-run average.
The decrease of two points in January to six index points is a little below the long-run average of seven points and broke a two-year streak of above average conditions.
NAB chief economist Alan Oster said there were pockets of stress and weakness across sectors, including in retail and manufacturing, but activity levels were overall holding up reasonably well.
"It's more of an economy losing momentum, but basically not dying, I suppose is the bottom line," Mr Oster said.
The survey also captured another uptick in prices and cost pressures after they improved in the final months of 2023.
He said this likely reflected discounting late last year that has not continued into 2024.
"It was nothing that you would get overly concerned about, but you would probably say, based on the survey, the idea that prices are going to continue to slow in a straight line is probably not true."
In a speech, an RBA official has reinforced the bank's view that inflation is coming down but will take some time to master.
Most of the decline in inflation so far can be attributed to lower rises in the price of goods, Reserve Bank of Australia head of economic analysis Marion Kohler said.
"Looking ahead, we expect goods inflation for many categories to be low for a time," Dr Kohler said.
Though she said events in the Red Sea could lead to a "bumpy" path down for global goods inflation.
Services price inflation - the cost of going to hairdresser, dentist or buying insurance or other professional services - remained high across the board.
"We are forecasting that services inflation will decline from here, but only gradually as demand moves into better balance with supply and domestic cost pressures moderate," she told the Australian Business Economists forecasting conference in Sydney.
"This decline in services price inflation is necessary for the inflation target to be achieved over time."
Australian Associated Press