Summer Holidays Support Spending in January, as Consumer Activity Slows

CommBank HSI Index Falls 6.9% in January as Spending Wanes Following Holidays

The CommBank Household Spending Intentions (HSI) Index for January fell 6.9% led by normal seasonal declines in retail and entertainment spending after Christmas and with signs of slowing activity following recent interest rate increases.

The first “normal” summer break since Covid supported general spending during the month and a lift in both domestic and international travel boosted the Travel spending index by 8.2% on the month. There was a large lift in spending on airlines and more modest gains in cruise lines, trailer parks and campgrounds, and travel agents, while spending on accommodation fell.

Entertainment spending fell 13.2% in original terms and in line with usual seasonal falls in January after stronger spending on eating and drinking out in December, but was marginally higher when seasonally adjusted — reflecting pent-up demand after two years of holiday breaks impacted by the pandemic.

Retail spending in the month of January fell by a large 21.3% in original terms but was marginally higher when seasonally adjusted. Annual retail spending was up 5.9% in the year to January, but with inflation running at 7.9% over this period, this points to slowing activity in the retail space.

Commonwealth Bank of Australia Chief Economist Stephen Halmarick said January’s CommBank HSI Index highlighted that Australians had made the most of the summer break following several years of Covid impacts and natural disasters, while households were beginning to feel the pinch from rising interest rates and bills.

“Australians certainly took advantage of the first ‘normal’ summer break since the beginning of the pandemic to take a holiday and this helped support general levels of spending across the economy,” Mr Halmarick said.

“With the CBA predicting further interest rate hikes from the RBA in the coming months and a high volume of fixed rate home loans expiring over the next 12 months, household budgets are becoming increasingly constrained. We expect a slowdown in consumer spending in 2023 and downside risks are building for the Australian economy.”

CBA’s Economics team is forecasting two further 25bp interest rate increases in March and April 2023 to a peak cash rate of 3.85% following last week’s 25bp hike to 3.35% by the Reserve Bank of Australia.

The CommBank HSI Index combines analysis of CBA payments data (Australia’s largest consumer spending data set covering approximately 40% of payment transactions), loan application information and Google Trends publicly available search activity data.

To access this powerful insight into spending trends, visit: commbank.com.au/hsi