Australian household spending increased by 0.2% in September, rebounding by less than expected (0.4%) from a flat month in August. Goods and non-discretionary categories were the key drivers of the gain in headline spending. Factors including the RBA's easing cycle and earlier fiscal support measures helped drive a rebound in consumption in recent quarters; however, that slowed to a 0.2% rise in inflation-adjusted spending in the September quarter - the softest outcome in a year.
Spending rose by 0.2% at the top line level in September to $77.4bn, lifting annual growth from 4.9% to 5.1%. Gains were concentrated in areas of non-discretionary spending (0.6%), including food (0.6%) and health (0.7%). This offset another weak month for discretionary spending (0%), after it declined modestly in August (-0.1%). Discretionary spending was propped up by recreation and culture (includes holiday travel) rising by 1.1% as it rebounded from falls in July (-0.4%) and August (-1.1%); furnishings and household equipment also fell in the prior two months but saw a more modest recovery in September (0.4%). The major categories of weakness in September were alcoholic beverages (-0.8%), clothing and footwear (-0.6%), transport (-0.4%) and hotels, cafes and restaurants (-0.3%).
In the latest quarter, household spending rose by 1.1%, but once adjusted for inflation, consumption volumes saw just a 0.2% rise, slowing from gains that ranged from 0.6% to 1% over the previous three quarters. That strong period for consumption underpinned the rise in GDP growth to 0.6% in the June quarter; however, based on today's number, with household consumption being the largest component of the economy, there are immediate downside risks to growth in the September quarter.
