The latest data from the Commonwealth Bank Household Spending Intentions (HSI) series released today shows the sharp increase in home buying intentions is continuing. Beyond housing, the overall picture is one of a gentle upturn in consumer spending intentions.

CBA’s Chief Economist Michael Blythe said: “The sharp upswing in home buying intentions continues and intentions are now approaching the record highs seen in early 2017.”

Current HSI readings are consistent with an ongoing increase in dwelling prices and a bottoming out in residential construction activity.

“The ongoing improvement in the home buying intentions series indicates that the low point for residential building construction will probably be around mid 2020,” he added.

Mr Blythe said retail spending intentions show a modest improvement is in place.

“After a poor September, there was a small pick-up in retail spending intentions data in October,” Mr Blythe said.

“The latest edition of the Commonwealth Bank HSI series, which incorporates data to the end of October, supports the RBA’s view that the economy has reached a ‘gentle turning point’. But the improvement is quite modest given the size of tax rebates and interest rate cuts delivered in recent months,” Mr Blythe said.

“By fuelling fears about the economic outlook, rate cuts are probably blunting some of the potential boost from tax rebates and rising house prices,” he added.

The HSI series offers a forward-looking view by analysing actual customer behaviour from CBA’s transactions data, along with household spending intentions from Google Trends searches. This combination adds to insights on prospective household spending trends in the Australian economy.

Mr Blythe points out that trends in some non-retail spending look reasonably encouraging.

“Travel spending intentions are increasing, albeit from low levels. Entertainment spending intentions are rising again. And education spending intentions are high and rising,” Mr Blythe said.

“Health and fitness spending intentions have, however, levelled out, while the recent slight improvement in motor vehicle purchase intentions from deeply negative territory has now stalled," he added.

Household Spending Intentions – October 2019

CBA obtains an early indication of spending trends across seven key household sectors in Australia. Apart from home buying, the series covers around 55 per cent of Australia’s total consumer spend across;  retail, travel, education, entertainment, motor vehicles, and health and fitness.

Retail Spending Intentions

Retail spending intentions are bouncing around at present but the lift in October means a modest uptrend is in place. That said, that turning point is pretty modest when benchmarked against record low mortgage rates, the wealth boost from rising house prices, solid jobs growth and tax rebates.

Travel Spending Intentions

Beyond the dominant retail component, spending intentions in other areas like travel are a little more positive.  Travel spending intentions are turning up, albeit from low levels.  The trend in Australian residents holidaying overseas has slowed.  The pick-up in the Travel HSI may be an indication that a lower AUD is encouraging domestic holidays instead.

Home Buying Spending Intentions

The one area where monetary policy stimulus is clearly working is the housing market.  The sharp uptrend in home buying intentions continues.  Home buying intentions rose further in October and are now close to the record highs seen in H1 2017.  Current HSI readings are consistent with an ongoing pick up in dwelling prices.  And also consistent with a turn in leading indicators of residential construction like building approvals. We see the residential construction downturn bottoming out around mid 2020.

Education Spending Intentions

Education spending intentions are high and rising. Policy makers and economic commentators can all see the need to lift productivity growth.  Rising infrastructure spending is one policy response that will help. But human capital is just as important as physical capital in driving productivity.  So the positive signal from the Education HSI is encouraging.

Entertainment Spending Intentions

Entertainment spending intentions are rising again. The uptrend in this very discretionary spending component is an encouraging sign that consumers are not completely beaten down.

Motor Vehicles Spending Intentions

Motor vehicle purchase intentions remain deep in negative territory.  And the tentative signs of a turn up in the past few months have stalled.

Health & Fitness Spending Intentions

Intentions to spend on health & fitness have levelled out.  But the levelling is occurring at a solid rate of growth.  Households are willing to allocate scarce disposable income to driving health & fitness spending with little impact from the vagaries of the economic cycle.

To find out more about CBA’s Household Spending Intentions Series, visit www.commbank.com.au/spendingintentions.

Notes for Editors:

About the approach

The new approach focuses on Australian households and their spending intentions. Employing near real-time spending readings from CBA’s household transactions data and combining them with relevant search information from Google Trends was used to map the data results on consumer spending.

About Google Trends

Google Trends is a publically available service that enables people to explore search trends around the world. These searches provide insights into what consumers are doing/researching on the Internet and what their spending intentions are.

Research calendar

CBA’s Household Spending Intentions series is published on the third Tuesday of every month.

Disclaimer

This ‘CBA Household Spending Intentions’ series provides general market-related information, and is not intended to be an investment research report. The ‘CBA Household Spending Intentions’ series 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 the ‘CBA Household Spending Intentions’ series, you should consider the appropriateness and, if necessary seek appropriate professional or financial advice, including tax and legal advice. The data used in the ‘CBA Household Spending Intentions’ series is a combination of the CBA Data and Google Trends™ data. Google Trends is a trademark of Google LLC. All customer data used or represented in this report is anonymous and aggregated before analysis and is used and disclosed in accordance with the Commonwealth Bank Group’s Privacy Policy Statement.

Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.

Full disclosures and disclaimers.