The latest CommBank Household Spending Insights Index has revealed a slight decrease in household spending by 0.3% in February, with the index falling to 141.61.
The decline was led by drops in household goods and transport categories, signaling a continued softening in consumer spending habits. Despite the overall downturn, Australians showed a strong preference for experiences over goods, as evidenced by increased spending on music festivals and event centres.
Amidst the overall decrease in spending, the hospitality category saw a rise of 0.7%, with music festivals experiencing a 76% spike in spending. Similarly, function and event centers witnessed a dramatic 115% surge, pushing the recreation category up by 0.5% for the month.
These gains, however, were insufficient to counterbalance declines across seven out of the 12 categories within the CommBank HSI Index, notably in household goods (-1.9%) and transport (-1.6%).
Queensland was the sole state to report an increase in spending for February 2024, albeit still trailing behind the national year-on-year growth rate. The most significant drops were observed in the Northern Territory (-3.2%), the ACT (-2%), and Victoria (-0.8%).
Stephen Halmarick (pictured above), CBA chief economist, commented on the findings, noting the trend of prioritising social events and experiences, such as concerts by popular artists like Taylor Swift. This shift in spending towards music festivals, flights, and hospitality venues reflects a broader pattern of consumer behavior favouring experiences, even as overall spending contracts.
“February was a big month for concerts and social events in Australia… with spending up on musical festivals, as well as spending on flights and hospitality venues, likely associated with the headline concerts,” Halmarick said in a media release.
“However, the jump in hospitality and recreation spending wasn’t enough to offset weakness across seven of the 12 categories of the Index, which paints a picture of consumers cutting back.”
The CommBank economist also highlighted the significance of the overall annual increase rate of the HSI Index falling to 3.5%, which, when adjusted for inflation, suggested a stagnation in real terms.
Looking ahead, Halmarick said CommBank anticipates a continued softening in household spending, influenced by the November 2023 interest rate hike. This trend, combined with slowing inflation, reinforces the belief that the RBA may begin to lower official interest rates by September this year.
The CommBank HSI Index, which offers a macro-level snapshot of month-on-month spending trends, is derived from de-identified payments data across approximately seven million CBA customers. This data represents around 30% of all consumer transactions in Australia.
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