CommBank – Signs of slowing household spending after interest rate hike

The CommBank HSI is up in May across most categories, but discretionary spending is starting to ease as the cost of living rises.

Consumer spending intentions as measured by the CommBank Household Spending Intentions Index rose 2.9% in May to 115.9, although discretionary spending appears to be slowing after recent rate hikes.

The index – which combines Commonwealth Bank of Australia (CBA) payments data and Google Trends search insights – regained ground after falling in April, with increases in seven of its 12 categories in May, including home buying, fitness and health and transport, along with lower spending on entertainment, travel and insurance.

Rising home loan applications and housing searches on Google led to an increase in home purchase spending intentions of 14.8%, down 3.3% from May 2021 and 13 percent below their peak in March 2021. The decline in auction lending and settlement rates in May will likely accelerate due to recent increases in cash rates by the Reserve Bank of Australia.

More Aussies on the move and higher gasoline prices drove transportation spending intentions, rising 11.7% in the month and 70.1% on May 2021. Spending intentions for health and fitness rose 12.8% in May, up 7.3% on the year.

Travel spending intentions fell 1.5% in May after hitting a post-COVID peak in April, but remain 52.3% higher May 2021. A decline in travel-related transactions and Google searches was no surprise after a busy holiday season in April, which also explains a 4.1% drop in entertainment spending intentions in May.

ABC Senior Economist Belinda Allen said consumer spending patterns continued to shift post-COVID and showed signs of slowing in response to higher interest rates and after incredible momentum following the easing of pandemic restrictions in late 2021.

“Household spending intentions rebounded in May after falling in April due to the number of public holidays. Given this seasonal volatility, the annual change in the CommBank HSI best reflects the state of our economy and is up 7.9% on the year – albeit due to higher prices rather than larger volumes,” she said.

“Rising prices and rising interest rates will have an impact on household spending. We see early indicators of weakness in the ABC’s credit and debit card spending data, with discretionary spending on recreation, clothing and footwear, and household furnishings and equipment down slightly and increased spending on food and drink from a peak.

“The RBA’s rate hike cycle is more aggressive than expected and we have revised our interest rate forecast up, as well as downgraded our outlook for economic growth and our forecast for house prices,” Mrs. Allen said.

The ABC’s economics team has revised its forecast following the larger-than-expected rise in the exchange rate last week. The team raised its cash rate target to 2.10% from 1.60% by the end of 2022, cut its GDP growth forecast for 2022 to 3.5% from 4.7% and expects national house prices to drop about 15%. by the end of 2023.

The CommBank HSI Index combines analysis of payments data from the ABC (australia largest consumer spending dataset covering approximately 40% of payment transactions), loan application information, and publicly available Google Trends search activity data. To access this powerful insight into spending trends, visit www.commbank.com.au/hsi

Index of household spending intentions – June 2022

What you need to know

The information in this press release is for informational purposes only and provides general market information, and is not intended to be an investment research report. This press release has been prepared without taking into account your objectives, financial situation (including ability to bear a loss), knowledge, experience or needs. Before acting on the basis of the information contained in this press release, you should evaluate its appropriateness and, if necessary, seek appropriate professional or financial advice, including tax and legal advice. The data used in this press release is a combination of “CBA transaction data” and Google Trends data. Google Trends is a registered trademark of Google LLC. The term “CBA Transaction Data” refers to the proprietary data of the Commonwealth Bank of Australia (“the Bank”) that originates from the Bank’s internal systems and may include, but is not limited to, credit card transaction data, merchant institution transaction data and credit applications. All client data used or depicted in this press release is anonymized 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 all opinions, conclusions or recommendations are reasonably held or made at the time of compiling this press release. As the statistics only reflect data from the Bank, no representations or warranties are made as to the completeness of the data and they may not reflect all market trends.

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