Household spending to further weaken in coming months, says CBA
Consumer spending intentions dipped again in June with home buying, health and fitness, entertainment and travel seeing the biggest declines.
Monetary policy in Australia is highly restrictive and is expected to see ongoing softness in household spending in the months ahead, according to the latest CommBank Household Spending Intentions Index for June.
“Given the lags involved with monetary policy, financial conditions are expected to continue to tighten for many Australian households well into 2024,” the major bank said.
The CommBank Household Spending Intentions (HSI) index for June 2023 declined by 1.7 per cent for the month, taking the index down to 116.0.
The key drivers of the decline in June were home buying (which has been volatile in recent months), health and fitness, entertainment and travel.
In seasonally adjusted terms the HSI index was also softer on the month.
Home buying intentions see significant drop
Home buying spending intentions declined by 26.2 per cent per month in June, led lower by a fall in home loan applications.
“Interestingly, Google searches related to home buying were higher on the month,” the index report stated.
“Home buying intentions have been volatile through much of 2023, likely reflecting the substantial increase in interest rates, a lack of stock available on the market and the recent trends to higher prices.”
Despite the dip in home buying intentions, CBA still expects dwelling prices to be up 3 per cent in 2023 and five per cent in 2024.
Retail spending intentions dip in June
Retail spending intentions declined 0.6 per cent in June following a 1.5 per cent gain in May. In seasonally adjusted terms, retail spending was a little higher.
Discretionary spending categories are seeing some weakness including department stores, clothing, appliances, hardware, florists and confectionary.
Strong population growth is driving spending on essential items, however, with grocery stores, supermarkets and bakeries recording some of the largest gains.
Entertainment spending
Spending intentions for entertainment are now down 14.3 per cent per month on annualised basis, according to the June data.
“Quite clearly, the tightening of financial conditions in Australia, especially for those households with a mortgage or paying rent, is seeing a reduction in spending on entertainment,” the index said.
Compared to June 2022 there has been declines in spending across music stores, book stores, art galleries, boat dealers, motor home dealers and camping shops.
“This has been partially offset by higher spending on: eating out and restaurants, fast food, live theatre, caterers, dance halls, movie theatres and pool halls,” the index report said.
Travel spending
Travel spending intentions were also down a further 2.5 per cent in June in original terms and were softer in seasonally adjusted terms.
“After a very strong post Covid recovery, Travel spending intentions have been moderating throughout the course of 2023. The annual rate of change for Travel spending is now running at 7.9 per cent lower,” the index said.
“Travel prices are still rising, albeit at a slower pace, than at the turn of the calendar year.”
Health and fitness spending volatile
Health and fitness spending has been choppy of late, according to CBA, with the seasonally adjusted data gradually drifting up.
“In the year to June there has been increased spending on doctors, sports clubs, professional sport, podiatrists, chiropractors, medical & dental labs, golf courses, nursing & personal care services and osteopaths,” the index report said.
“This has been offset by reduced spending on bike shops, opticians and orthopaedic goods and services.”
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