CommBank Household Spending Insights Index rose 0.7 per cent in August, with strongest monthly gain in Queensland. However annual spending growth remains subdued – strongest in Western Australia and South Australia, weakest in Victoria.
The monthly CommBank Household Spending Insights Index rose 0.7 per cent to 137.0 in August, led by increased education spending by international university students, higher transport spending due to increased petrol prices and elevated recreation activity related to the FIFA Women’s World Cup.
Based on de-identified payments data from approximately 7 million CBA customers – comprising roughly 30 per cent of all Australian consumer transactions – the index shows that spending on household goods rose for a second month in a row after prolonged weakness, while gains in motor vehicles, health and insurance spending were offset by weaker hospitality and utilities spending – reflecting the government rebates available for energy bills.
Surging numbers of international students enrolling for universities saw education spending rise strongly by 2.8 per cent in August, with the annual rate of spending on education accelerating to 14.7 per cent and up from 9.0 per cent in July.
Recreation spending rose 1.9 per cent in August and to 8.4 per cent on an annual basis due to the FIFA tournament and a number of big name concert tours, with ticketing agency spending up 70 per cent in the month. Recreation spending was also driven by online travel bookings, commercial airlines, cruise lines and accommodation.
Queensland saw the strongest monthly spending growth during August (+1.5 per cent), followed by Tasmania (+1.3 per cent) and ACT (+1.1 per cent), while annual spending growth remains strongest in Western Australia (+4.7 per cent) and South Australia (+4.5 per cent). Spending growth is weakest in Victoria and flat year on year, with only a small rise in spending in August (+0.4 per cent).
CBA Chief Economist Stephen Halmarick said that annual spending growth measured by the CommBank HSI Index remained subdued despite increasing 2.3 per cent in August, and was significantly weaker than its peak of 18.7 per cent in August 2022 as households manage the increased cost of living.
“The effects of 400bp of Reserve Bank of Australia interest rate rises is clearly reflected in a significant slowdown in annual household spending growth measured by the CommBank HSI Index. With the RBA holding rates since June, our view is that the hiking cycle is now at an end.
“Monetary policy is now restrictive and financial conditions will continue to tighten in the months ahead on the lagged effect of RBA interest rate hikes and the fixed rate mortgage refinancing task. We continue to expect household spending to weaken further over the remainder of 2023 and into 2024,” Mr Halmarick said.
The CommBank HSI Index is based on 12 spending categories, with a breakdown provided between goods and services, retail and non-retail, as well as essential and discretionary spending. A separate Home Buying Index tracking home lending data rose by 0.6 per cent in August, decelerating on an annual basis to -13.0 per cent from -9.0 per cent in July.
“Although there will still be a lagged effect from previous interest rate rises from the RBA, our view that interest rates have peaked in Australia will likely support home buying activity in the months ahead, albeit constrained by a low level of available supply. We forecast dwelling prices will rise 7 per cent in 2023 and by a further 5 per cent in 2024,” commented Mr Halmarick.
The CommBank HSI Index uses all CBA credit and debit card transactions (including ATM, BPAY and direct debit payments) to show national and state-based Australian consumer spending each month. Future release dates for 2023 are 11 October, 13 November and 13 December at 2.30pm. For more information on the monthly CommBank HSI Index, visit: commbank.com.au/hsi
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