Higher prices for goods and services prices saw the CommBank Household Spending Intentions (HSI) Index rise marginally by 0.9 per cent in October to 116.0.
The HSI Index’s gains in October were narrowly based and focused on increased spending in the household services (+3.7 per cent), retail (+3.3 per cent) and entertainment (+2.1 per cent) sectors. Half of the gain in retail spending was driven by higher food spending and price increases on supermarket shelves.
However spending declined in half of the index’s 12 underlying categories and the annual rate of spending growth in October halved to 7.4 per cent from 14.1 per cent in September.
The largest declines for October were in home buying (-3.1 per cent) and travel (-2.4 per cent), with the Reserve Bank of Australia’s (RBA) seven consecutive monthly interest rate hikes seeing home buying spending intentions fall 27.3 per cent year on year and pent up post-Covid travel demand cooling.
Commonwealth Bank of Australia (CBA) Chief Economist Stephen Halmarick said: “Increased household spending in October reflected higher prices and seasonality, with discretionary spending continuing to weaken in response to increased interest rates.
“However this marginal increase in spending was narrowly based and focused on the household services, retail and entertainment sectors. Cost of living pressures saw many spending categories continue to weaken and there was a marked decline in total spending growth from September.
“As the RBA rate hikes flow through the economy, we would expect to see further declines in a number of HSI categories, although elevated inflation and higher prices could continue to lift nominal spending for a while yet.”
CBA’s economics team is forecasting one further 25bp interest rate hike from the RBA in December to an expected cash rate peak of 3.10 per cent, before interest rate cuts commence late in calendar 2023.
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
Household Spending Intentions Index — October 2022