Rate rises and pre-Christmas sales saw household spending drop sharply in December 

The monthly CommBank Household Spending Insights (HSI) Index fell sharply in December, dropping 3.9 per cent, as the cumulative effect of successive interest rate rises as well as consumers bringing forward holiday spending flowed through to household spending. 

Spending fell in eight of the CommBank HSI Index’s 12 underlying categories, with the biggest fall seen in household goods (-16 per cent) including furniture and household appliances. 

December also saw declines in recreation (-6.5 per cent), food and beverage (-2.7 per cent) and hospitality (-0.8 per cent). These falls were partly offset by increased spending on transport (+1.0 per cent), insurance (+0.6 per cent) and health (+0.2 per cent). 

CBA Senior Economist Belinda Allen said the fall in December more than offset the gain of 1.6 per cent in November 2023 and continued the pattern of recent years where strong consumer spending in November is followed by weak results for December. 

“Household budgets are undoubtedly constrained with rate rises leading to a weakening of consumer spending,” Ms Allen said. 

“Households in all states reduced spending in December, led by declines in Victoria, South Australia and New South Wales.

“With the pace of economic growth in Australia moderating and the full impacts of November’s rate rise yet to flow through to the consumer, we expect a further slowdown in the pace of household spending over the coming months. 

“We have also seen inflation moderate which supports our view that the monetary policy tightening cycle has come to an end and that the RBA can join the expected global shift and start to lower interest rates in September this year.”

CBA is forecasting the RBA will lower the cash rate by 75bp in the second half of 2024, starting in September, and a further 75bp in first half of 2025. 

The CommBank HSI index – which tracks month-on-month data at a macro level and is based on de-identified payments data from approximately 7 million CBA customers, comprising roughly 30 per cent of all Australian consumer transactions – also showed sharp differences among certain states and territories. 

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