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A slight fall in discretionary spending suggests consumers may be shifting their spending due to cost-of-living pressures, according to the ABS.
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Discretionary spending by households dips in latest data
05 April 2024
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The Monthly Household Spending Indicator for February indicates that while household spending overall was 3.6 higher than a year ago based on the February Index, discretionary spending dropped over the year.
Spending on discretionary goods and services fell 0.2 per cent, while non-discretionary spending rose 6.9 per cent, “highlighting the shift in consumer behaviour due to cost-of-living pressures”, the ABS stated.
The increase in non-discretionary spending was driven by increased spending on transport, food and health.
In the previous release for January, discretionary spending had risen only 0.2 per cent, while non-discretionary spending grew 5.6 per cent.
However, ABS head of business statistics Robert Ewing said growth in household spending has risen from its low point in December last year.
“The 3.6 per cent rise in spending follows increases of 1.2 per cent in December, and 2.9 per cent in January,” said Ewing.
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In the data for February, household spending rose across all states and territories compared to the same time last year.
South Australia reported the largest rise from 4.0 per cent in January to 7.9 per cent in February. This was followed by the ACT at 7.6 per cent and Western Australia at 5.9 per cent.
“Spending on transport rose 12.3 per cent, making the largest contribution to total spending growth, as automotive fuel prices increased 4.1 per cent as shown in the monthly Consumer Price Index Indicator,” said Ewing.
“Consumers are also spending more on transport services such as air travel, tours, and cruises compared to the same time last year,” he said.
Other areas where consumers have increased spending are recreation and culture at 5.9 per cent and hotels, cafes and restaurants at 5.8 per cent.
The CommBank Household Spending Insights index for February showed a 0.3 per cent decline in spending for the month, which followed a 3.2 per cent increase in January.
The increase in January did not fully offset a decline of 3.5 per cent in December, with the HSI Index still lower than the November 2023 reading of 142.6.
“[This points] to a weakening of household spending when the summer months are taken together,” said Commbank.
Seven of the 12 HSI spending categories decreased in February, led by falls in household goods and transport.
“There was also weakness on the month in communications and digital, food and beverage, education, motor vehicles and insurance,” the bank said.
“These declines were partly offset by increases in spending in February for utilities, health and household services.”
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