Household spending flat in July

The monthly CommBank Household Spending Insights (HSI) Index was flat in July, unchanged at 148.2.

Modest spending increases were seen across seven of the 12 spending categories, with the most notable uplifts in household goods (up 1.3%), recreation (up 0.9%), communications and digital (up 0.9%) and insurance (up 0.9%).

According to Commonwealth Bank of Australia, gains in household goods were led by the thrifty shopper, fuelled by increases in spending at discount stores and online marketplaces as consumers seek cheaper alternatives in the current cost-constrained environment. On the other hand, a busy sporting calendar supported recreation spending gains driven by ticketing services, sports grounds/facilities, and online travel bookings.

“There were several sporting events in July – such as the NRL State of Origin decider and the Wallabies rugby tests – that likely boosted recreational spending however this wasn’t enough to offset weakness across other categories of the Index, as consumers continuing to cut back,” says CBA Chief Economist Stephen Halmarick.

“We’re also seeing changes in shopping behaviours within categories, as consumers look for cheaper alternatives, like second-hand bargains and discount store sales.”

Household spending in July saw the biggest falls across hospitality (down 2.4%), utilities (down 1.3%) and food and beverage (down 1.2%).

“Hospitality spending dropped in July and has been the weakest category over the past year, as consumers cutback on visiting cafes and bars,” says Mr Halmarick.

The annual HSI growth rate increased to 4.5% for the year, but the biggest increases are seen in essential services such as insurance (up 15.9%) and health (up 13%).

The disparity in spending remains across home ownership status, with spending by renters up just 0.3% for the year to July compared to mortgage holders (up 3.3%) and those who own their home outright (up 4%).

“Spending by renters remains close to flat this year with significantly more cutbacks on discretionary spending compared to homeowners or those with a mortgage,” says Mr Halmarick.

He says it’s too early to tell how the federal government’s income tax cuts would impact household spending.

“As income tax cuts have only just taken effect, we will likely have a clearer picture of impacts on spending behaviour over the coming months,” he says.

“More broadly, we expect that softer economic data, a further deceleration of inflation, and easing of monetary policy by overseas centrals banks will see the RBA begin to cut interest rates in the months ahead.”