The CommBank Household Spending Intentions (HSI) Index fell 1.7 per cent in June, as consumer activity continued to weaken across a range of categories led by declines in home buying, health & fitness, entertainment and travel.
Home buying spending intentions declined 26.2 per cent in the month. Home buying intentions have been volatile through much of 2023, reflecting increases in Reserve Bank of Australia (RBA) interest rates, a lack of stock available on the market and higher prices.
Discretionary spending continued to weaken, with entertainment spending down 5.4 per cent on May and 15.4 percent on the year. Travel spending fell a further 2.5 per cent after May’s decline, with spending on hotels, motels & resorts, trailer parks & campgrounds and sport & recreation clubs all down. This was partly offset by spending increases on travel agents, airlines, cruise ships and airports as families took overseas trips during the school holidays.
Retail activity remained muted, although strong population growth supported increased spending on grocery stores, supermarkets and bakeries. However, discretionary retail continued to weaken with reduced activity in department stores, clothing, appliances, hardware, florists and confectionary.
Motor vehicle spending rose a further 3.8 per cent in June and is now 66 per cent higher over the past year – the fastest growth of all categories – as supply chain constraints ease and cars imports into Australia increase. The penetration of electric vehicles also continues to increase. Utilities spending is up 7.2 per cent in the year to June on the back of higher bills – the fastest pace of increase in the history of the HSI series data back to 2017.
Commonwealth Bank of Australia Chief Economist, Stephen Halmarick, said the tightening of financial conditions in Australia, especially for households with a mortgage or paying rent, continues to constrain discretionary spending.
“Although the RBA held interest rates steady in early July, monetary policy in Australia is highly restrictive and this is expected to see ongoing softness in household spending in the months ahead. We are forecasting a final rate hike from the RBA in August, taking the cash rate to 4.35 per cent. Given the lags involved with monetary policy, financial conditions are expected to continue to tighten for many Australian households well into 2024,” Mr Halmarick commented.
The CommBank HSI Index combines analysis of CBA payments data (Australia’s largest consumer spending data set covering approximately 40 per cent of payment transactions), loan application information and Google Trends publicly available search activity data.