The CommBank Household Spending Intentions (HSI) Index jumped 1.8% to 107.3 in February, driven by a post-lockdown increase in transport spending and an uptick in home-buying spending intentions, following the usual seasonal weakness in January.
Transport spending intentions was up by 11% in February, due to higher fuel prices and increased spending on taxis, parking lots, car washes, and freight and trucking services. But with many people continuing to work remotely, public transport spending was still comparatively weak, CBA said.
Home-buying-spending intentions surged 29.6% in the month as people returned from summer holidays, but was down 4.4% compared to February 2021, when home buying was peaking after the first COVID-19 lockdown. CBA said this result is consistent with the view of its economists that property prices will end 2022 flat and decline 8% in 2023 as the effects of expected interest rates increases are felt.
The index also showed a 4.1% uptick in household-services spending during February, due to increased activity in home improvements and the use of services such as child care and personal care. Travel spending was 6.9% lower than in January, but was 40.5% higher than February last year.
Stephen Halmarick, CBA chief economist, said the rise in the CommBank HSI Index in February showed Australians were back on the move after COVID-19 restrictions ended.
“Following the usual seasonal softness in January and effects of the Omicron variant, it was good to see spending intentions bounce higher in February,” Halmarick said. “Increased spending intentions in home buying, transport, and household services supports our view that as Australians get back out-and-about the economic outlook for 2022 is for a year of solid growth.”
Halmarick said CBA doesn’t expect the Ukraine situation to significantly impact the Australian economy, but that there are three main implications: market sentiment and a “flight to quality,” higher energy prices and inflation, and reduced global growth.
“Given surging inflation as well as strong employment and wages growth data, we maintain our view that the Reserve Bank of Australia will need to raise interest rates earlier than many expect, with an initial increase to 0.25% in June this year, rising to a peak of 1.25% in early 2023,” he said.
