Valentine’s Day failed to open wallets this year, with consumer spending dropping in key sectors last month.
The CommBank Household Spending Insights (HSI) Index fell by 0.2 percent in February, with Australians reducing spending on activities usually the focus of the annual day of love.
CBA Senior Economist Belinda Allen said consumers pulled back most on Recreation (-1.6 percent) and Hospitality (-1.2 percent) purchases during the month.
Ms Allen said spending on Food and Beverage (-0.7 percent), Education (-0.6 percent) and Transport (-0.5 percent) also fell in February from a month earlier.
She said half of the 12 HSI spending categories rose in February, led by essential spending on Utilities (+1.9 percent), Health (+0.7 percent) and Insurance (+0.7 percent).
“The lift we saw in spending at the end of 2024, driven by discount and sales activity, hasn’t carried through to the New Year as constrained consumers dedicate a large portion of their wallet to spending on the essentials.”
Ms Allen said the annual HSI spending growth rate also slowed considerably in February to 1.5 percent.
She said that was a result of a combination of factors, including a shorter February than the 2024 leap year and the absence of last year’s “Taylor Swift effect” which boosted national spending this time last year.
“Annual spending has been mixed across the country and we await the March spending data to gauge the impacts of ex-tropical cyclone Alfred with parts of Queensland and northern NSW heavily impacted by the natural disaster.
“Looking ahead for the year, we believe it will take further interest rate relief to lift national consumer spending.”
Ms Allen said the CBA expected the Reserve Bank of Australia (RBA) to cut interest rates in May with data for the first quarter of 2025 confirming inflation was tracking toward the RBA’s 2-3 percent target.
