AUSTRALIA DATA: Household Spending Firms In May, Y/Y Trend Improving Modestly
Australian May Household spending data was stronger than forecast, rising 0.9%m/m, against a 0.5% forecast. In y/y terms we printed 4.2%, against an expected gain of 3.5% and prior 3.8% outcome. The April outcome was revised to flat in m/m terms, after initially being reported as a 0.1% gain.
- Today's print contrasts with the earlier retail sales this week, which came in below market forecasts (+0.2%m/m, versus +0.5% forecast). More weight should be given to today's May household spending outcome though, as it will replace the retail sales print from the end of this month.
- The ABS noted: "Robert Ewing, ABS head of business statistics, said: 'The rise in May was driven by spending on discretionary goods and services. 'Discretionary spending rose 1.1 per cent, as households spent more on clothing and footwear, new vehicles, and dining out. ‘Meanwhile, non-discretionary spending was up 0.5 per cent, rising for a fifth consecutive month.’
- Indeed, only food and alcoholic beverages saw m/m falls in May, all other categories saw m/m rises. Outside of alcoholic beverages, all sub indices are up in y/y terms as well.
- The chart below plots household spending in y/y terms against the Westpac Consumer Sentiment reading. Spending is maintaining a modestly positive trend in y/y terms. Sentiment is well up from cycle lows from 2022/2023, but the improvement has stalled since the end of last year.
- The RBA meets next week, with a 25bps cut widely expected. There has been little shift in OIS pricing for next week's meeting post today's data.
Fig 1: Household Spending Y/Y & Westpac Consumer Sentiment Index
Source: Bloomberg Finance L.P./Westpac/MNI
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