Spending declines as rising interest rates impact households

The CommBank Household Spending Intentions (HSI) Index fell 0.5 per cent down to 114.9 in September from 115.5 a month earlier, as higher interest rates begin to take a toll on household spending.

This was the first monthly decline in the HSI since the Reserve Bank of Australia (RBA) began hiking interest rates earlier this year. CBA economists expect to see a more pronounced impact on the HSI index – which combines Commonwealth Bank of Australia (CBA) payments data and Google Trends search information – in the months ahead.

September’s biggest declines came in the categories of Health and fitness, Home buying, Household services and Transport.

In a reversal from August, the Health and fitness category declined by a sharp 11.2 per cent in September, with fewer visits to doctors and dentists. Home buying was also down 4.4 per cent this month and 24.6 per cent for the year, with increased interest rates slowing demand for home loans.

By contrast, motor vehicle spending rose 6 per cent in September, following a strong 14 per cent gain in August. Spending on Motor vehicles is now up 3.3 per cent for the year, moving into positive territory for the first time since March.

CommBank Chief Economist Stephen Halmarick said: “The effect of rising interest rates is beginning to impact on household budgets and Australian consumer spending is adjusting accordingly. Households are seeing a noticeable difference to their mortgage repayments and therefore are considering how they can adjust their expenses elsewhere.

“The gains in the Motor vehicle index provides some relief for the industry, as global supply chain issues begin to resolve. The improvement follows the strength seen in August, with additional deliveries of vehicles coming into Australia.

“Meanwhile, transport spending has reduced, yet we can expect an increase in the coming months as petrol prices rise as the governments excise levy returns to its full amount.”

After correctly predicting the latest interest rate increases, CBA’s Economics team forecast a further 25bp rise at the RBA’s November Board meeting, before the RBA holds to assess the lagged impact of rate rises on the Australian economy.

The CommBank HSI Index combines analysis of CBA payments data (Australia’s largest consumer spending data set covering approximately 40 per cent of payment transactions), loan application information and Google Trends publicly available search activity data. To access this powerful insight into spending trends, visit: commbank.com.au/hsi

Disclaimer: The information contained in this media release is published solely for informational purposes and provides general market-related information, and is not intended to be an investment research report. This media release has been prepared without taking into account your objectives, financial situation (including the capacity to bear loss), knowledge, experience or needs. Before acting on the information in this media release, you should consider its appropriateness and, if necessary, seek appropriate professional or financial advice, including tax and legal advice. The data used in this media release is a combination of ‘CBA transaction data’ and Google Trends™ data. Google Trends is a trademark of Google LLC. The term ‘CBA transaction data’ refers to the proprietary data of the Commonwealth Bank of Australia ("the Bank") that is sourced from the Bank’s internal systems and may include, but is not limited to, credit card transaction data, merchant facility transaction data and applications for credit. All customer data used or represented in this media release is anonymous and aggregated before analysis, and is used and disclosed in accordance with the Bank’s Privacy Policy Statement. The Bank takes reasonable steps to ensure that its proprietary data is accurate and that any opinions, conclusions or recommendations are reasonably held, or are made at the time of compilation of this media release. As the statistics take into account only the Bank’s data, no representation or warranty is made as to the completeness of the data and it may not reflect all trends in the market. 

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