Consumer spending measured by the CommBank Household Spending Intentions Index rose by a modest 0.9 per cent in June to 117.3, while there was clear evidence of weaker discretionary spending following the recent interest rate hikes.
The marginal rise in the index – which combines Commonwealth Bank of Australia (CBA) payments and lending data and Google Trends search information – was narrowly based. While the index is now equal to its record high set in March 2022, the gain in June was mainly driven by increased cost of goods and higher spending in the transport, education and household services sectors.
Australians returning to the office saw transport spending surge 6.7 percent in June, due to the higher cost of fuels and increased use of public transport, car parks, taxis and childcare services. Elevated demand for work clothing also drove increased spending on department stores, dry cleaning and tailoring. While transport spending is up 132.2 percent on June 2021, it remains well below the pre-pandemic levels.
Travel spending intentions rose by 1.5 percent in June and are up 71.3 percent on the year, as pent-up demand is unleashed. Travel agencies, cruise lines, airlines, airports, hotels & motels, tourist attractions, sports and recreational camps and bus lines all benefited, although motor home and RV rentals weakened as people looked to holiday further afield.
CBA Chief Economist Stephen Halmarick said: “Australian consumer spending remains higher than a year ago, as the economy recovers from the 2021 lockdowns, with the CommBank HSI Index up 11.9 percent relative to June 2021.
“However the index’s modest gain in June was narrowly based, driven mainly by the increased price of many goods and services, such as petrol, which helped drive higher spending on transport, along with increased spending on education and household services.
“Interest rate-sensitive sectors of the economy and are clearly starting to show the impact of recent Reserve Bank interest rate increases, with discretionary spending on entertainment, home buying and retail all declining on the month. With further interest rate increases expected through the remainder of 2022, we would expect to see discretionary spending weaken further in coming months.”
After last week’s third consecutive monthly increase in interest rates, CBA is forecasting a 25bp hike in August and additional increases over the coming months taking the cash rate target to 2.1 percent by end of 2022. CBA’s economics team has trimmed its GDP growth forecast for 2022 to 3.5 percent (from 4.7 percent) and expects house prices to fall around 15 percent from peak to trough by the end of 2023.
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. To access this powerful insight into spending trends visit www.commbank.com.au/hsi.