Australian household spending rose by a stronger-than-expected 0.6% in September, rebounding from a weak month in August (-0.1%). Higher fuel prices boosted spending, while travel and leisure spending was also strong alongside the AFL and NRL finals series. Sales volumes increased at a solid pace (0.7%) over the quarter, reflecting the resilience of household demand; however, the RBA has effectively hiked rates twice since then, with its September hike coming on the final day of the month, followed by yesterday's rate rise (see here).
Household spending increased by 0.6% month-on-month in September - well above the 0.2% rise that was expected - and 6.8% over the year. A downward revision adjusted the result in August from flat (0%) to a modest fall (-0.1%), after spending rose sharply in July (1%).
Gains in the health (1.5%) and recreation and culture categories (0.8%) were the key factors behind the rebound in September. Health spending was supported by increased consultations as the flu season came late on. The AFL and NRL finals through September boosted spending on travel, gambling and electronic goods. Strong ticket sales for upcoming concerts were also a factor.
Meanwhile, spending on fuel rose 5.4% in September as fuel prices reaccelerated due to the conflict in the Gulf continuing and with the fuel excise tax cut having ended in August.
For the September quarter, volumes (or spending adjusted for inflation) increased by 0.7%, following similar sized gains in recent quarters. Volume growth increased from 2.5% to 3.2% year-on-year, its fastest pace since early 2023.
Volume gains were broadly based in the September quarter, with transport (1.6%) and clothing and footwear (1.2%) leading the way. Hotels, cafes and restaurants fell very slightly (-0.1%), while alcohol and tobacco (-1.2%) continued to contract - though that is affected by underreporting due to the well documented rise in illicit tobacco sales.
At yesterday's meeting, the RBA made a modest downgrade to its outlook for household consumption growth this year from 1.6% from 1.4%Y/Y. Risks are weighted heavily to the downside given the lagged effects from the RBA's 5 rate rises have yet to play through, while the housing market downturn is also showing no signs of slowing.
