Household spending soft in March

The monthly CommBank Household Spending Insights (HSI) Index increased 0.2% in March to 141.8.

This, says the bank, was led by shoppers stocking up the fridge ahead of the earlier-than-usual Easter break.

The spending uplift was led by food and beverage (up 4%) and transport (up 4.2%). Supermarkets, liquor stores, convenience stores, butchers and bakers were the major recipients.

While on the roads, higher fuel prices and the Easter long weekend saw increased spending at petrol stations (up 7.4%), ride sharing services (up 14.5%) and public transport (up 6.7%).

NSW saw a significant increase in spending, up 2%, to move from well below the national average to above the national average. Western Australia remains the strongest state for the year to March (up 4.3%), while spending in the Northern Territory was the weakest (down 0.9 %), joining Tasmania, Victoria and the ACT below the national average.

While 10 of the 12 HSI spending categories increased in March, Commonwealth Bank says the rise across most categories was modest and the HSI Index remains lower than the 142.6 reading in November 2023, pointing to a softening of household spending since the final RBA rate hike that month.

Notably, spending on household goods fell for the third time in four months (down 1.7%). Recreation was also down 6.8% in March, following a spending boost at summer music events. Household goods spending is now negative for the year, while recreation spending is up a small 0.4% year to March. These trends are also reflected in the fact that spending on essentials is up 4.4% in the year to March, while spending on discretionary items is up just 1%.

Commonwealth Bank of Australia Chief Economist Stephen Halmarick says that despite a boost from Easter, the March HSI continues to paint a picture of a soft consumer.

“Much of the spending lift in March can be attributed to the earlier-than-usual Easter holidays with people travelling and entertaining at home. Beyond food and beverage and transport, gains in other categories were modest, and another fall in spending on household goods suggests consumers are prioritising spending on essentials,” he says.

“The annual rate of increase of the HSI Index is steady at 3.4%, which is close to flat in real terms when an inflation rate of 3.5-4% is taken into account.

“Since the November RBA interest rate rise, we’ve seen consistently soft household spending and we retain our view that, when coupled with decelerating inflation, the RBA can start lowering the official interest rate in September this year.”