Despite this, consumer environment remains soft, says economist
The CommBank Household Spending Insights Index (HSI) increased by 1.1% in May to 150.21, following a 1% decline in April.
Despite the increase, household spending has remained weak since January, with monthly gains averaging just 0.1%. This contrasts with a monthly growth rate of 0.8% in the first four months of 2023.
Nine out of the 12 HSI spending categories rose in May. Household goods saw a 2.3% increase, food and beverage goods increased by 1.8%, hospitality was up by 1.7%, and transport rose by 1.3%.
Over the year to May 2024, the HSI Index rose by 4.3%, driven by significant increases in essential spending categories: insurance (+8.6%), utilities (+7.1%), transport (+6.1%), and education (+6%).
Conversely, the weakest categories over the past 12 months included motor vehicle (+1.6%), recreation (+2.6%), communications and digital (+2.6%), and household goods (+2.8%).
All states and territories except the Northern Territory recorded positive growth rates in May, with Queensland (+1.8%), Tasmania (+1.7%), and Victoria (+1.6%) leading the way.
For the year to May, the Northern Territory (+5.7%) and Western Australia (+5.6%) led spending growth, while the ACT (+2.6%), Victoria (+3.7%), and New South Wales (+4.8%) experienced softer growth.
CBA senior economist Belinda Allen (pictured) commented on the latest CommBank HSI Index, noting that despite the rise 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,” Allen said.
“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.”
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