The Reserve Bank’s aggressive interest rate hikes are starting to impact spending, the latest CommBank Household Spending Intentions Index (HSI) has revealed, with CBA economists expecting a more pronounced impact on the HSI Index in the months ahead.
The HSI Index, which combines CBA payments data and Google Trends search information, dropped 0.5% to 114.9 in September from 115.5 the previous month – the first monthly fall since RBA began hiking interest rates in May.
The September data showed the biggest declines came in the categories of health and fitness, home buying, household services, and transport.
In a reversal from August, the health and fitness category slumped by a significant 11.2% in September, with fewer visits to doctors and dentists. Home buying slipped 4.4% last month and 24.6% for the year, with increased interest rates slowing demand for home loans, CBA data showed.
By contrast, motor vehicle spending increased 6% in September and up 3.3% for the year, after a strong 14% rise in August. This was the first time since March that spending on motor vehicles has moved into positive territory.
“The effect of rising interest rates is beginning to impact on household budgets and Australian consumer spending is adjusting accordingly,” said Stephen Halmarick, CommBank chief economist. “Households are seeing a noticeable difference to their mortgage repayments and therefore are considering how they can adjust their expenses elsewhere. The gains in the motor vehicle index provides some relief for the industry, as global supply chain issues begin to resolve. The improvement follows the strength seen in August, with additional deliveries of vehicles coming into Australia. Meanwhile, transport spending has reduced, yet we can expect an increase in the coming months as petrol prices rise as the government's excise levy returns to its full amount.”
After correctly predicting the latest interest rate hike, CBA economists now predict a 25bp rise at RBA’s November board meeting.
