Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 560

Household spending falls as higher costs bite

The CommBank Household Spending Insights (HSI) index tracks month-on-month data at a macro level and is based on de-identified payments data from approximately 7 million CBA customers, comprising roughly 30% of all Australian consumer transactions.

The following is an extract from the latest HSI report.

The HSI index for April 2024 declined by a significant 1.0%/mth in seasonally adjusted terms, to 148.1. The fall in April followed a gain of 0.4%/mth in March. At 148.1 the HSI index is down from the January 2024 peak of 149.7, indicating that household spending has weakened over the first four months of 2024.

For April, eight of the 12 HSI categories saw an increase in spending, led higher by spending on Education (3.7%/mth), Utilities (2.5%/mth) and Motor vehicles (1.7%/mth). However, this strength was more than offset by large falls in spending on Food & beverage (-3.8%/mth), Hospitality (-3.3%/mth) and Recreation (-2.6%/mth), as well as lower spending on Transport (-1.7%/mth).

As can be seen from the chart on the left, the fall in Food & beverage spending had by-far the largest impact on the softer reading for April. The fall in Food & beverage spending in April came after a 2.1%/mth rise in March — reflecting the earlier-than-usual time of the Easter holiday in 2024. Similarly, reduced spending on Hospitality in April followed gains in March. In contrast, spending on Recreation has now fallen for three months in a row, after a strong gain in January 2024.

In the year to April 2024 the pace of increase in the HSI index slowed to down from 3.9%/yr in March. The 2.6% annual growth rate is the slowest pace of increase since October 2023. Over the year to April the strongest increase has been spending on Education (10.8%/yr), followed by Insurance (9.6%/yr) and Utilities (9.0%/yr). The weakest spending has been on Food & beverages (-1.4%/yr), Hospitality (-1.0%/yr) and Household goods (+0.3%/yr).

Results by State

SA and Tasmania (both 0.3%/mth) and NSW (0.1%/mth) bucked the national trend and saw an increase in spending in April. All other jurisdictions were lower, led down by NT (-1.7%/mth), Vic (-1.2%/mth), Qld (-0.9%/mth), ACT (-0.7%/mth) and WA (-0.2%/mth). In the year to April, the strongest state for Household spending is now Tasmania (4.0%/yr), followed by SA (3.7%/yr). Softer growth has been seen in Vic and the ACT.

  • WA declined in April and has now slipped from its previous position as the strongest state. -0.2%/month +3.4%/year
  • SA saw the equal strongest increase in spending in April and is one of the strongest jurisdictions over the past year. +0.3%/month +3.7%/year
  • NT was the weakest jurisdiction in April, but is still running above the national average year to April. -1.7%/month +3.3%/year
  • Tas saw a rise in spending in April and is now the strongest states for spending over the past year. +0.3%/month +4.0%/year
  • Qld saw a decline in spending in April, with the annual growth rate decelerating. -0.9%/month +3.2%/year
  • NSW spending edged higher in April, with the pace Of annual growth close to the national average. +0.1%/month +3.1%/year
  • ACT spending was down in April, with the annual growth rate well below the national rate. -0.7%/month +1.1%/year
  • Vic saw the second largest decline in spending in April and remains one of the weakest of all the states on an annual basis. -1.2%/month +1.9%/year

Goods v Services

  • Goods spending declined by -0.8%/mth, in seasonally adjusted terms in April — following a -0.8%/mth fall also in March.
  • Services spending was down -1.0%/mth in April in seasonally adjusted terms, but this came after a 1.4%/mth gain in March.
  • In annual terms, Goods spending is up 2.4%/yr to April, while Services spending is up 7.7%/yr.

Retail v Non-Retail

  • Retail spending fell by -1.1%/mth in April in seasonally adjusted terms, after a 1.0%/mth gain in March.
  • Non-retail spending was up 0.4%/mth in April in seasonally adjusted terms, follow a 0.3%/mth gain in March.
  • On an annual basis, Retail spending is up just 0.2%/yr in April, but non-retail spending is up a solid 5.3%/yr.

Essential v Discretionary

  • Spending on Essential goods & services was up 0.5%/mth in April, after a 0.3%/mth gain in March.
  • Spending on Discretionary items fell by a large -4.4%/mth in April, following a decline of -2.2%/mth gain in March.
  • On an annual basis, spending on Essentials is up 4.0%/yr to April, while spending on Discretionary is up just 1.8%/yr.

Home ownership insights

From April 2024 we introduce the CommBank HSI by home ownership status. We use a smaller subset of the data to split the HSI into three different home ownership types: Owner with Mortgage, Owner Outright and Renter.

This breakdown emphasises the challenging environment for those who Rent and those who have a Mortgage when compared to those that own their home outright.

Spending by renters have lagged their counterparts since late 2022 with the difference growing over the past year given the large lift in rents.

Mortgage holders are recording a lift in spending in between renters and those that own their home outright (ie without a mortgage).

Owner with mortgage

  • Insurance, utilities and health crowd the top three spots of contribution to spending for those with a mortgage, as it does for the other home ownership types.
  • Over the past year those with a mortgage have reduced spending on hospitality, household services and food & beverage goods.

Owner outright

  • Homeowners devote a large share of their wallet to insurance, health and utilities and these three categories have contributed the most to spending growth over the past year.
  • Household goods and recreation make up the fourth and fifth spot in terms of positive spending contribution, while household services and food & beverage goods detracted from spending growth over the past year.

Renter

  • The share of wallet for renters differs, with less spent on insurance, utilities and health. Renters typically devote a larger share of their wallet to hospitality and food & beverage goods.
  • Renters have reduced spending on recreation, hospitality, food & beverage goods and household services over the past year.


click to enlarge

 

Stephen Halmarick is Chief Economist - Head of Global Economic & Markets Research, and Belinda Allen is a Senior Economist at Commonwealth Bank of Australia. This article is for informational purposes only and is not to be relied upon for any investment purposes. It has been prepared without taking into account your objectives, financial situation (including your capacity to bear loss), knowledge, experience or needs.

 

RELATED ARTICLES

Trying to save money? Pay in cash

banner

Most viewed in recent weeks

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

Meg on SMSFs: $3 million super tax coming whether we’re ready or not

A Senate Committee reported back last week with a majority recommendation to pass the $3 million super tax unaltered. It seems that the tax is coming, and this is what those affected should be doing now to prepare for it.

How much do you need to retire comfortably?

Two commonly asked questions are: 'How much do I need to retire' and 'How much can I afford to spend in retirement'? This is a guide to help you come up with your own numbers to suit your goals and needs.

Meg on SMSFs: Clearing up confusion on the $3 million super tax

There seems to be more confusion than clarity about the mechanics of how the new $3 million super tax is supposed to work. Here is an attempt to answer some of the questions from my previous work on the issue. 

The secrets of Australia’s Berkshire Hathaway

Washington H. Soul Pattinson is an ASX top 50 stock with one of the best investment track records this country has seen. Yet, most Australians haven’t heard of it, and the company seems to prefer it that way.

How long will you live?

We are often quoted life expectancy at birth but what matters most is how long we should live as we grow older. It is surprising how short this can be for people born last century, so make the most of it.

Latest Updates

Property

Australian housing is twice as expensive as the US

A new report suggests Australian housing is twice as expensive as that of the US and UK on a price-to-income basis. It also reveals that it’s cheaper to live in New York than most of our capital cities.

Exchange traded products

The catalyst for a LICs rebound

The discounts on listed investment vehicles are at historically wide levels. There are lots of reasons given, including size and liquidity, yet there's a better explanation for the discounts, and why a rebound may be near.

Retirement

The new retirement challenges facing Australians

A new report from Vanguard has found an increasing number of Australians expect to be paying off a mortgage in retirement, or forced to rent. A financially secure retirement is no longer considered a given.

Strategy

Why aren’t there more Warren Buffetts?

Warren Buffett is widely regarded as the most successful investor ever. Rather than keep his secret sauce hidden, he's shared his knowledge for decades, so why aren't more investors able to replicate his methods and success?

Retirement

Finding joy in retirement

Retirement can last more than 30 years, necessitating thoughtful planning. Many miss workplace friendships, identity, status, expertise, and routine, but these can be replaced with renewed activities and purpose.

Shares

Bull and bear case for Australian equities for FY25

ASX market bulls point to corporate balance sheets and earnings, while bears highlight company valuations and persistently higher inflation. It's best to ignore short-term noise and focus on investing in quality companies.

Gold

How gold can help diversify your portfolio

As inflation is likely to remain stubbornly elevated, the correlation between bonds and equities could remain high, reducing diversification within portfolios. A gold allocation may help to better protect your investments.

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.