Sharp Drop In April Consumption Driven By Discretionary Spending

CBA’s household spending indicator (HSI) based on digital transactions fell 1% m/m in April to be up 2.6% y/y down from 3.9% y/y but only +1.4% y/y per person. March retail sales fell 0.4% m/m to be up only 0.8% y/y and the April CBA data suggest this is likely to moderate further given the high correlation between the two series (April retail sales due May 28). Consumption is expected to remain soft and then begin to recover in H2 2024 as tax cuts and lower inflation drive an improvement in real incomes.

• Spending increased in non-discretionary sectors such as education, utilities, insurance and health. Food, hospitality and recreation were down sharply as well as transport. The HSI is nominal and so the increase in expenditure also reflects price increases, especially for insurance. Essential spending rose 0.5%m/m to be up 4% y/y whereas discretionary fell sharply by 4.4% m/m to be up 1.8% y/y.
• Goods spending fell 0.8% m/m after -0.8% in March and services fell 1% m/m after rising 1.4%. Services spending continues to outpace goods at 7.7% y/y compared to 2.4% y/y.
• There have been updates to the HSI’s weights, seasonal adjustment factors and some more details including HSI per capita and by home ownership status.

Source: MNI - Market News/ABS/Bloomberg