The CommBank Household Spending Intentions (HSI) Index – which combines Commonwealth Bank of Australia (CBA) payments data and Google Trends search information – rose 1.9% in November on the back of solid Black Friday sales.
However, the index’s annual rate of growth slowed significantly from October as interest rate hikes and higher prices dampened consumer activity. CommBank also expects spending to slow further in 2023.
Commenting on the result, CommBank Chief Economist Stephen Halmarick noted that the “HSI Index shows households are feeling the impact of rising interest rates, higher prices and bills, with the HSI index’s annual rate of increase halving to 3.2% from 7.5% in October and down from a peak of 15.2% in August”.
“The CommBank HSI Index’s narrow rise in November could be something of a ‘last hurrah’, with underlying spending trends showing household are hesitant to spend too much as interest rate hikes flow through in increased bills and higher prices”, Halmarick added.
“With the Reserve Bank of Australia (RBA) having increased interest rates by 300bp in 2022, household budgets will become more constrained into the new year, putting further downward pressure on spending”.
Separate CommBank consumer research shows that customers are tightening their belts and looking to reduce their spending through the holiday period.
“Our latest consumer research shows that 61 per cent of Australians are planning to spend less on Christmas this year. Customers are looking for ways to save money and ease pressures with the rising cost of living”, Rochelle Eldridge, Commbank’s General Manager, Shopping said.
“73% say they have cut back on discretionary ‘nice to have’ items, while 69% are looking for ways to make money go further including preparing ahead and shopping on sale”.
The latest ‘Time to buy a major household item’ index from ANZ-Roy Morgan also fell to a four-week low, and is tracking at recessionary levels:
Given the full impact of interest rate hikes are yet to be felt, and the pending fixed rate mortgage reset, 2023 is shaping up as a bad year for household consumption and the economy.
