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The monthly CommBank Household Spending Insights (HSI) Index fell 1% in October.
This was led by declines in spending across recreation, hospitality and food and beverage as the ongoing effect of interest rate rises continues to be felt on consumer spending.
Spending on essential goods and services was up 0.3%, while spending on discretionary was down 3.7%.
Spending fell in seven of the CommBank HSI Index’s 12 underlying categories, with the biggest falls across recreation (down 4.7%), hospitality (down 4.5%) and food and beverage (down 1.3%).
Weakness in these categories was partly offset by increased spending on utilities (up 2.2%) and transport (up 2%) as households manage higher energy bill and petrol prices.
“October’s CommBank HSI Index demonstrates a clear tightening in consumer spending compared to September’s result, which was buoyed by a number of one-off events like the FIFA Women’s World Cup,” says Commonwealth Bank of Australia (CBA) Chief Economist Stephen Halmarick.
“We’re clearly seeing the flow on effects of the interest rate increases from earlier in the year.
“Last week’s decision from the RBA to raise the case rate by a further 25 basis points, to 4.35%, is likely to add further downward pressure to household spending over coming months. However, November will be an interesting one to watch with potential increases in spending due to the November sales.
“Looking ahead, our base case is no further increases in the RBA cash rate, although there remains upside risk based on the inflation figures due at the end of January.”
The CommBank HSI index – which tracks month on month data at a macro level and is based on de-identified payments data from approximately seven million CBA customers, comprising roughly 30% of all Australian consumer transactions – also showed sharp differences among certain states and territories.
The Northern Territory saw the strongest growth in household spending in October, up 1.1%, followed by Tasmania (0.5%).
“There is a clear East versus West divide, with NSW and Victoria the weakest of the states, likely driven by how highly leveraged these states are,” says Mr Halmarick. “Victoria saw a large decline in spending in October down 1.5% for the month, while NSW fell 0.9%.”