The latest Household Spending Insights (HSI) index released by CommBank showed spending fell 0.3% in February, reversing the 3.2% gain in January.
Driving the decline were falls in household goods (down 1.9%) and transport (down 1.6%) spending.
The nation also spent less on communications (down 0.7%), food and beverage (down 0.5%), education (down 0.5%), motor vehicles (down 0.2%), and insurance (down 0.1%) last month.
The noted slumps on seven of the index’s 12 underlying categories offset the 0.7% gain in the hospitality category, which was fuelled by the 76% jump in spending at music festivals reflecting the consumer activity when Taylor Swift held five soldout shows in Melbourne and Sydney.
Regular concert ticket prices for the Australian leg of ‘the Eras tour’ ranged from $79 to $379, while VIP packages that came with exclusive merchandise went for as much as $1,249.
By comparison, Australians spend an average of $600 per week on rent.
Other big artists to tour in February included Pink, and Blink-182.
A 115% surge in function and event centre expenditures also drove the 0.5% lift in the recreation category.
“February was a big month for concerts and big social events in Australia and consumers clearly prioritised tickets to see their favourite artists like Taylor Swift, with spending up on musical festivals, as well as spendings on flights and hospitality venues, likely associated with the headline concerts,” CBA chief economist Stephen Halmarick said.
“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 household spending decline in February pulled the annual rate of the HSI index down to 3.5% in seasonally adjusted terms, which is close to flat in real terms when an inflation rate of 3.5% to 4% is taken into account.
“We expect to see continued softening of household spending in the near term as the November 2023 interest rate hike takes hold, which together with decelerating inflation supports our view that the RBA can commence official interest rate cuts in September this year,” Mr Halmarick said.
CommBank’s HSI index is based on de-identified payments data from approximately 7 million customers of Australia’s biggest bank, comprising roughly 30% of all Australian consumer transactions.
The HSI index is generally in line with the Australian Bureau of Statistics household spending indicator, but with the HSI released well ahead of the ABS data.
In January, for example, the HSI index revealed a 3.1% rise in spending, whereas the ABS reported a 3% increase.
What does the RBA think about this?
It appears the soft spending data would not shift much of the Reserve Bank’s assessment at the Board’s upcoming meeting on 18-19 March.
Speaking on a panel at yesterday’s AFR Business Summit, RBA’s new chief economist Sarah Hunter acknowledged that households are “clearly struggling”, pointing out that “inflation is the single biggest drag”.
However, she was quick to note the “data (Q4 inflation and GDP) are broadly in line” with what the RBA is anticipating
The December quarter inflation rate of 4.1% undershot RBA’s forecast of 4.5% while the 1.5% annual GDP result matched the figure the central bank pencilled in for the period.
“That’s not to say we’re not monitoring and looking, and we’ll obviously be reviewing and updating our forecasts and publishing those in May,” Ms Hunter said.
Aussies eager to spend on experiences
Although the ‘Taylor Swift effect’ has subsided, it appears Australians’ appetite for experiences will continue to provide a boost to overall spending this year.
New research released by American Express revealed more than three-quarters (76%) of Aussies are planning to take up to three vacations in 2024.
The majority of holiday-makers plan to spend more or the same amount of money on travel this year, with an average leisure travel budget of $9,131.
“Travel is back in full swing, and we’ve seen guests show a thirst for knowledge on our voyages while enjoying the ultra-luxury, once-in-a-lifetime travel experience that we offer,” noted Steve Mortys, vice president of sales and trade relations at Seabourn Cruise Line.
Amex’s 2023 Global Travel Trends Report also found over 59% of Aussies intend to attend more live sporting events this year, with one in five (20%) planning to travel domestically to watch their favourite athletes play.
To fund these expenses, 73% said they were willing to give up daily expenses like food and coffee.
“A quarter of those surveyed are planning to use their credit card points to cover travel expenses this year,” said Corinne Ng, vice president and general manager of Travel and Lifestyle Services at American Express Asia Pacific.
Photos supplied by Ogilvy PR for American Express
