The monthly CommBank Household Spending Insights (HSI) Index increased 1.1% in May to 150.21.
This follows a 1% drop in April, continuing the month-to-month spending volatility seen throughout 2024.
While household spending rose in May, Commonwealth Bank of Australia says spending remains soft since January with monthly gains averaging just 0.1%, pointing to a weak consumer environment. This compares to a monthly growth rate of 0.8% in the first four months of 2023.
Nine of the 12 HSI spending categories rose in May, led by increases in spending on household goods (up 2.3%), food and beverage goods (up 1.8%), hospitality (up 1.7%) and transport (up 1.3%), all of which were weak in April.
In the year to May, the pace of increase in the HSI Index lifted to 4.3%, driven by insurance (up 8.6%), utilities (up 7.1%), transport (up 6.1%) and education (up 6%).
On the flip side, the weakest categories over the past 12 months include motor vehicle (up 1.6%), recreation (up 2.6%), communications and digital (up 2.6%) and household goods (up 2.8%).
Across the states and territories, all bar the Northern Territory recorded positive rates of growth in May. This was led by Queensland (up 1.8%), Tasmania (up 1.7%) and Victoria (up 1.6%).
CBA Senior Economist Belinda Allen says despite a rise in spending in May, the consumer environment remains soft.
“Spending in May bounced back from April which continued the spending volatility we have seen throughout the year,” she says.
“When looking at spending trends since January however, we can see that the consumer spending environment remains muted, having risen by just 0.1% per month on average since January and driven in large part by spending on essential categories like insurance, utilities and transport. This suggests that consumers are still needing to make spending choices and are prioritising essential purchases.
“It is unlikely tax cuts commencing in the third quarter of 2024 will have a material impact on consumer spending and we are expecting households to save rather than spend their tax cut. Looking forward, the key for consumption will be growth in real household income, and the first quarter 2024 National Accounts data indicated this remains weak.
“Assuming the labour market loosens, and inflation continues to cool, we anticipate the RBA can commence an easing cycle in late 2024. The challenging inflation backdrop and a shift in household spending behaviour are the key risks to this base case.”
