The Australian economy got a leg up from Taylor Swift concerts but the much-anticipated visit was not enough to counter penny pinching elsewhere.
Spending as tracked by Commonwealth Bank has been generally subdued and fell 0.3 per cent over the month of February, but households are still managing to find the cash for big ticket recreational experiences.
Spending on hospitality was up 0.7 per cent in February, buoyed by a 76 per cent monthly increase in the “music festivals” category.
Spending on function and event centres was up a massive 115 per cent over the month.
CBA chief economist Stephen Halmarick said this was largely the “Taylor Swift effect” at work, supported by a number of other big name acts and festivals.
“But it wasn’t big enough to offset the weakness elsewhere,” he told AAP.
“People basically had to cut back their spending elsewhere to accommodate it.”
While discretionary spending picked up over the month, driven by the recreation boost, the annual figures told a different story.
In the year to February, money going to essentials lifted 4.4 per cent compared to the three per cent increase for discretionary.
“So people are having to spend more money on the essentials and actually spending less money on the discretionary,” Mr Halmarick said.
He said big price hikes in must-have services such as insurance, health and education were eating deeper into budgets and further constraining spending on the nice-to-haves.
Over the month, spending on food and beverages was down 0.5 per cent, communications and digital – which includes things like streaming services and computer games – declined 0.7 per cent, and household goods sunk 1.9 per cent.
Countering some of that weakness was monthly increases in spending categories such as recreation, hospitality, health, utilities and household services.
Consumer spending is the biggest component of the economy so a weakening pulse has implications for the central bank’s handling of inflation, which is moderating but still above target.
CBA is expecting interest rate cuts in September and Mr Halmarick said the spending data supported this forecast.
He said the November interest rate hike was only just starting to flow through to variable home loan repayments, and this would trigger further softening in consumer activity.
“That combined with the deceleration in inflation makes us increasingly confident that the RBA has finished raising rates and the next move will be down.”
The CommBank Household Spending Insights index is released each month and captures roughly 30 per cent of consumer transactions.
Separate data from CreditorWatch showed higher interest rates, persistent inflation and lower consumer demand were putting pressure on businesses.
The Business Risk Index showed invoice values – the total billable amount – continued to trend downwards, now sitting at their lowest point since September.
The report found businesses with one default have a 24 per cent chance of going insolvent in the next 12 months.
CreditorWatch chief executive Patrick Coghlan said trade payment defaults going up while invoice values decline was a “real worry”.
“This indicates that cash reserves are being depleted and margins are being squeezed,” he said.
“An increasing number of businesses have less cash coming in, which means they are then finding it more difficult to pay their own suppliers.
“They are also cutting the size of their orders and running down inventories.”
Poppy Johnston and Tess Ikonomou
(Australian Associated Press)
