May spending surge crushes expectations
Fresh figures from the ABS show household spending indicators gained 0.9 per cent month on month beating market predictions of a 0.5 per cent increase.
The rise in household spending came just two days after soft retail data came in at 0.2 per cent, against forecasts of a 0.5 per cent lift. Australian are spending more at the shops. NewsWire / John Appleyard Credit: News Corp Australia
Commonwealth Bank senior economist Belinda Allen explained to NewsWire the difference in figures comes from how the data is collated.
'There's a few differences between the two releases, with retail trade being survey-based and only capturing around a third of consumer spending,' Ms Allen said.
'Monthly household spending intentions data, which came out today, uses bank transactional data and other sources so it includes a bit over 60 per cent of consumer spending.
'Depending on what cateorgy does well can mean the difference between the releases.'
According to Friday's monthly household spending data seven of the nine spending categories rose in May, led by Clothing and footwear, which was up 3.7 per cent, Transport gained 1.7 per cent, and Miscellaneous goods and services rose 1.3 per cent.
Alcoholic beverages and tobacco slipped 1.4 per cent and Food dropped 0.1 per cent to be the only two negative quarters.
This follows a flat result in April and a 0.1 per cent fall in March.
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,' he said.
'Meanwhile, non-discretionary spending was up 0.5 per cent, rising for a fifth consecutive month.'
Household spending is now 4.2 per cent higher than this time last year, led by health spending which jumped 8.4 per cent and miscellaneous goods and services which is up 8.3 per cent.
Services spending was 7.5 per cent higher than May 2024, while goods spending was up 1.5 per cent.
The boost in household spending indicators comes just days after the ABS also released its retail sales data which underwhelmed market expectations. A raise in household spending defied weak retail sales Credit: News Corp Australia, NewsWire/ Monique Harmer
Retail sales were up 0.2 per cent in May following a disappointing April which saw sales fall by 0.1 per cent even though Australians were treated to two public holidays in the month.
Ms Allen said regardless of the figure used, it is too low to impact the RBA rate decision next week.
'When you look at the collective data since the May release … there has been enough to show that lower interest rates are both necessary and manageable for the Australian economy both from an activity and inflation perspective' she said.
'We have to remember interest rates are still in restrictive territory, they will still be in the restrictive territory with this next rate cut and the economic recovery is still pretty lacklustre.'
Ms Allen said even though consumer spending picked up on today's household spending data it is too early to tell if Australia's economy is starting to track better.
'There are some green shoots in the data,' she said.
'Discretionary spend is a little stronger, including eating and drinking out so there are some areas where you can see an improvement in consumer spending.
'But if you look at how much it has lifted throughout the year, it is still pretty soft.'
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