The CommBank Household Spending Insights (HSI) Index rose 0.5% in May.

According to CBA, there are, however, signs emerging that consumers are starting to loosen the purse strings for small luxuries thanks to lower costs in key spending areas like petrol and electricity bills. 

Despite overall spending softness in the second quarter so far, hospitality and recreation now rank at the top of annual spending categories when compared to May last year, as households splashed out on restaurants, food delivery, cinemas and online travel, indicating continued divergence in spending trends. 

In May, the strongest spending gains were in the motor vehicle (up 1.5%), household services (up 1.2%) and health (up 1.1%) categories, while utilities (down 1.1%) and education (down 0.5%) fell during the month.

“The consumer spending rebound is unfolding at a slower rate than we expected, which could be the result of scarring from a loss of real household income post-Covid, and the impact of global uncertainty caused by trade tensions,” says CBA Senior Economist Belinda Allen.

“We are seeing some green shoots, however, as our insights suggest households are using money saved from energy rebates and lower petrol prices to enjoy themselves by dining out and spending on experiences.

“We expect to see a pickup in household spending in the second half of the year, and while our base case remains for the first RBA cash rate cut to come in August, the balance of probabilities is shifting towards July and will depend on upcoming CPI and labour market data.”  

The May report also showed that those with a mortgage (up 3.3%) and renters (up 2.3%) outspent those who own their home outright (up 0.3%) showcasing the impact of interest rate cuts and slowing rental increases on spending flexibility.

“It’s interesting to see the home ownership leaderboard flip in May, as those who own their home outright may be more likely to be concerned about the impact of lower interest rates and market volatility on superannuation balances, and curbing their spending as a result,” says Ms Allen.