Spending intentions show how Aussies are adapting to new normal

Online learning, and health and fitness spending intentions increase as Australians make changes to their lifestyle amid the coronavirus pandemic

The latest monthly data to the end of March 2020 published by the CBA Global Economic and Markets Research team indicates a clear and sustained response to the efforts to slow the spread of coronavirus, as Australians adapt to a new way of living. CBA Chief Economist Stephen Halmarick says the economic shutdown clearly impacted all HSI indicators, with most spending categories experiencing falls.

“When we look at spending intentions last month, we can see both entertainment and travel spending intentions declined sharply as the economic shutdown took hold, with both categories witnessing the lowest readings since the series began,” Mr Halmarick said.

“In contrast, retail, online learning and health and fitness spending intentions saw sharp rises as people prepared themselves for an extended shutdown of many parts of the economy,” Mr Halmarick added.

Mr Halmarick points out that while people were feeling confident with home buying intentions in March, the latest market data indicates residential property prices may fall by up to 10 per cent over the next six months*.

“Looking at our home buying intentions series in March 2020, people were feeling confident with spending intentions sitting close to all-time record highs. Since then we have seen turnover in the housing market decline significantly after public open houses and auctions were banned, with rising job insecurity also being a factor,” Mr Halmarick said.

Mr Halmarick says the latest HSI series also highlights how some Aussies are remaining focused on learning new skills online.

“After a large fall in February 2020, education spending intentions increased in March – as online and virtual schooling and higher education began to dominate,” Mr Halmarick said.

The series also showed shopping for a new car or commercial vehicle declined as people limited their discretionary activities, with the recovery previously seen in motor vehicle spending intentions stalling in March.

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

Monthly Household Spending Intentions

Retail Spending Intentions

After a number of months of soft outcomes, retail spending intentions jumped substantially higher in March.
The surge in spending in March was likely related to consumer’s response to the developing coronavirus shutdown and a jump in spending on supermarket items, alcohol and household equipment and furnishings.

Travel Spending Intentions

Following initial signs of a slowdown in February, travel spending intentions declined sharply in March as the coronavirus shutdown and travel restrictions took hold.
The March travel HSI readings are the lowest, by a large margin, since the series began.
The ongoing shutdown of key sectors of the economy, the effective closing of the borders and the government directive to ‘stay at home’, could be expected to weigh on the travel intentions HSI for a number of months.

�Թ��վ Buying Spending Intentions

�Թ��վ buying intentions declined marginally in March, but remained near record highs.
The RBA’s substantial monetary policy easing over March has seen mortgage interest rates fall and this would (under normal circumstances) be expected to support buying intentions.

Education Spending Intentions

Along with travel, the education sector is particularly exposed to the negative effects of coronavirus. A significant decline in the education HSI in February was seen.
The education HSI picked-up in March, however, as ‘on-line’ and ‘virtual’ schooling and higher education began to dominate.

Entertainment Spending Intentions

As with the travel HSI, the coronavirus shutdown and the ‘stay at home’ requirements have seen the entertainment HSI decline in March.
The March entertainment HSI reading is the lowest in the history of the HSI and well below the February reading.

Motor Vehicles Spending Intentions

The HSI readings for motor vehicles showed a distinct turn up in spending intentions from late in 2019 – which then extended into early 2020.
This improvement was generally related to the ‘wealth-effect’ from the gains in the housing market and house prices.
However, this improvement partly reversed in March as the coronavirus shutdown made shopping for a new car or commercial vehicle challenging.

Health & Fitness Spending Intentions

After an initial downturn related to the bushfires in February, the health and fitness HSI jumped sharply high in March.
The increase in the health and fitness HSI may be related to spending intentions on medical needs and the desire to create ‘home gyms’ and/or undertake ‘virtual’ personal training activities in the coronavirus shutdown period.

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