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Household spending slows as consumers reduce spending
The monthly CommBank Household Spending Insights Index (HSI). fell 1.0% in April to 148.11 following an Easter rise in March, with annual spending growth slowing to just 2.6% for the year.
The index remains below the peak of 149.7 in January 2024 and, while spending on basic necessities such as education (+3.7%), public services (+2.5%) and motor vehicles ( +1.7%) increased in the month, consumers retreated when spending on Food & Beverage (-3.8%), Hospitality (-3.3%) and Recreation (-2.6%) which dragged the index downwards. In fact, spending across all discretionary categories fell 4.4% in April.
The April HSI report features the addition of new Home Ownership Insights that evaluate spending across various types of home ownership. Insights revealed the challenges faced by renters whose spending grew by just 1.3% annually compared to mortgage owners (+4.5%) and direct owners (+6.3%). Also new included in the April report is a per capita analysis of the index that takes into account strong population growth, showing an annual spending growth rate of just 1.4% compared to 2.6% of the traditional HSI.
Across all states, Victoria continues to show weakness, with spending down 1.2% month-on-month and up just 1.9% year-on-year. South Australia (+0.3%), Tasmania (+0.3%) and New South Wales (+0.1%) showed spending resilience over the month, while Tasmania is now the state with the strongest spending, with growth of 4.0% per year.
Stephen Halmarick, chief economist at CBA, said April’s decline reflected continued weakening in household spending.
“The April HSI paints a picture of a constrained consumer following the Easter surge into March. Significantly, the annual rate of household spending fell from 3.9% in March to 2.6% in April, led by a sharp decline in discretionary spending, which fell 4.4% in the month. Mr. Halmarick said.
“We can see from the new Home Ownership Insights included in this month’s report that renters in particular have cut back, with spending just rising to 1.3% over the year, while those who own their home outright they experienced the strongest spending growth at 6.3%. percent per year.
“Across all states, spending in Victoria continues to be subdued while NSW fell away to sit with South Australia and Tasmania as the only states to record spending growth for the month. Western Australia lost 0.2% in April, losing its place as the highest-spending state for the year.
“We expect weak consumer spending and below-trend economic growth to continue through 2024, and despite recent inflation data surprising to the upside, we expect the RBA to cut interest rates in November this year. ‘year”.
The CBA expects the RBA to lower the cash rate by 25 basis points to 4.1% in 2024.
THE CommBank The HSI – which tracks month-on-month data at a macro level and is based on anonymized payment data from around 7 million CBA customers, comprising around 30% of all Australian consumer transactions – also showed stark differences between some states and territories.