We had a key pointer yesterday towards the strength of consumer spending when the latest Australian Bureau of Statistics spending data showed a solid, but slowing rate of growth in November.
The ABS said household spending was up 11.4% in November compared with the same month in 2021, with spending on transport and cafes and restaurants showing the biggest increases.
They were two of the main sectors where spending contracted in the Covid driven lockdowns and social distancing restrictions in late 2021 and into the early weeks of 2022.
The ABS said the Northern Territory (+16.1 per cent) recorded the largest increase in spending due to snap lockdown/lockouts in the territory the year before.
“Strong increases seen in previous months in New South Wales, Victoria and the Australian Capital Territory all softened as pandemic restrictions in these states eased from November 2021,” the ABS noted.
The data is a precursor to the more detailed retail sales report for November, due to be released later today.
The report’s most important disclosure was the continuing surge towards spending on services compared to goods. Purchases of goods boomed during the lockdowns but as those restrictions eased, spending moved to services – especially travel.
The ABS said through the year, household spending increased for both services (up 24.0%) and goods (up 1.2%).
In May of last year, the ABS reported that spending on goods (was up 5.7%) and services spending was up 10.2%.
In the intervening six months, spending on services more than doubled and on goods, it went backwards as Australians were allowed to resume offshore and interstate travel and holidays.
That doesn’t augur well for many retailers in the about to start December reporting season but it does strongly confirm the expected record interim profit Qantas will reveal next month.
ABS head of macroeconomic statistics, Jacqui Vitas, said on Tuesday the rate of overall spending growth was weakening.
“This latest rise was less significant than previous months, as COVID-19 Delta variant impacts (such as lockdowns) eased towards the end of 2021,” she said.
The numbers hinted at a retail slowdown, with spending on furnishings and household equipment down 7% in November, while clothing and footwear was modestly higher at 2.3%.
Compared to pre-pandemic November 2019, total household spending was 21.2% higher, with discretionary spending (up 26%) increasing more than non-discretionary spending (up 17%).
In May of last year, the ABS reported that discretionary (8.9%) and non-discretionary spending (6.8%) were roughly in balance. That reveals the dramatic change in consumer spending patterns in the six months to November as Covid became an everyday event and not a pandemic in the minds of millions of shoppers.
The rapid growth in discretionary spending also confirms the rebound of spending in bricks and mortar outlets and malls and the decline in online activity.
That also confirms the weak performance by listed online groups such Kogan (but not Temple & Webster) and the Catch website owned by Wesfarmers, which has seen a sharp slowing in activity levels.
The relative change in spending between discretionary and non-discretionary has also been driven by the very strong labour market and the small pay rises. Falls in real wages have yet to show up significantly in house spending.
Inflation was up around 7% in the year to November, – yesterday’s data is not adjusted for price rises but allowing for an average rise around 7%, real spending looks like it was up about 4% or so, which is not very strong.
