New CommBank data shows that while consumer spending is still relatively subdued, some signs indicate that consumers are starting to loosen their purse strings.
This includes a stronger lift in household goods spending in May, lifting 0.8 per cent month-on-month and 5.5 per cent year-on-year. The annual rate of increase for May is stronger than the 3.5 per cent lift recorded in April, and is reportedly being driven by bump ups in men’s and women’s clothing stores as well as discount and variety stores.
According to CommBank’s Household Spending insights report for May 2025, the bank as well as the Reserve Bank of Australia are expecting a pick up in household spending in the second quarter of 2025.
Current estimates of real household consumption are for a lift of 0.7 per cent per quarter, up from 0.4 per cent per quarter in Q1.
“The progression of consumer spending data will be a key focus of the RBA ahead of the 8 July rate decision,” CBA’s senior economist Belinda Allen and associate economist Lucinda Jerogin shared in the report.
“The balance of probabilities continues to shift towards a July rate cut (our base case remains August) but will depend on upcoming data flow including the May monthly CPI and labour market data.”
The CBA economists noted that Australians are opening wallets for small luxuries, mostly thanks to lower costs in key spending areas like petrol and electricity bills.
Despite overall spending softness in the second quarter so far, hospitality and recreation now rank at the top of annual spending categories when compared to May last year, as households splashed out on restaurants, food delivery, cinemas and online travel, indicating continued divergence in spending trends.
In May, the strongest spending gains were in the motor vehicle (up 1.5 per cent), household services (up 1.2 per cent) and health (up 1.1 per cent) categories, while utilities and education fell during the month, down 1.1 per cent and 0.5 per cent respectively.
“The consumer spending rebound is unfolding at a slower rate than we expected, which could be the result of scarring from a loss of real household income post-COVID, and the impact of global uncertainty caused by trade tensions,” CBA’s Belinda Allen said.
“We are seeing some green shoots however, as our insights suggest households are using money saved from energy rebates and lower petrol prices to enjoy themselves by dining out and spending on experiences.
“We expect to see a pickup in household spending in the second half of the year, and while our base case remains for the first RBA cash rate cut to come in August, the balance of probabilities is shifting towards July and will depend on upcoming CPI and labour market data.”
The May report also showed that those with a mortgage (up 3.3 per cent) and renters (up 2.3 per cent) outspent those who own their home outright (up 0.3 per cent) highlighting the impact of interest rate cuts and slowing rental increases on spending flexibility.
“It’s interesting to see the home ownership leaderboard flip in May, as those who own their home outright may be more likely to be concerned about the impact of lower interest rates and market volatility on superannuation balances, and curbing their spending as a result,” Allen said.
The CommBank HSI Index tracks month-on-month data at a macro level and is based on de-identified payments data from approximately 7 million CBA customers, comprising roughly 30 per cent of all Australian consumer transactions.