The fell 4.3 per cent in April as a result of fewer trading days in the month with the Easter and Anzac Day public holidays, while the lagged effect of recent Reserve Bank of Australia (RBA) interest rate increases is expected to further weaken consumer spending over coming months.
The CommBank HSI Index was led lower by reduced spending intentions in home buying, health & fitness, transport and household services. Retail spending intentions also fell 1 per cent following a strong 12.6 per cent rise in March, although retail spending has tracked sideways in seasonally adjusted terms over recent months.
Spending intentions on motor vehicles increased strongly by 5.3 per cent, as consumers continued to take advantage of increased imports and stock post-Covid. A slight decline in purchases was offset by increased car loan applications – electric vehicles now account for 8 per cent of sales, up from 1.1 per cent a year ago.
Higher utilities bills saw utilities spending continue to climb, up 7 percent on April last year – the fastest annual pace of growth in utilities spending since the HSI was introduced in 2018.
Commonwealth Bank of Australia Chief Economist Stephen Halmarick said weaker spending in April reflected the increasing cost of living for Australians, while the number of public holidays also impacted activity.
“Spending activity continues to moderate in response to the increased cost of living, with annual spending growth falling to 3.7 per cent in April from a peak of 15.2 per cent in August 2022 and well below the rate of inflation at 7 per cent.
“With the RBA increasing interest rates again last week to 3.85 per cent monetary policy is now highly restrictive and we expect the lagged effect of higher interest rates will further weaken household spending as the year progresses.
“However we believe this latest increase will mark the peak in the cash rate, and that the RBA will commence interest rates cuts later this calendar year as inflation starts to trend downwards towards the Reserve Bank’s 2-3 per cent target range,” Mr Halmarick said.
CBA economics team is forecasting a significant reduction in the budget deficit in the Federal Budget 2023-24 to be announced later today and measures to support more affordable housing.
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:
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