Home-related spending weak as ‘money tighter’: ANZ

There’s been strong annual growth in discretionary services compared to January 2022, the latest ANZ-observed spending data in the week to 21 January has found.

Conversely, there has been “much weaker” discretionary goods spending, it confirmed.

Senior economist at ANZ Research Adelaide Timbrell explained: “A mix of COVID-related impacts including the prevalence of work-from-home, as well as periods of travel restrictions, led to stronger spending of durable goods for many households.”

As what could have affected the spending on household goods, Ms Timbrell added: “The rapid rise in housing prices through 2021 also spurred on more household upgrades.

“Once a person has bought a couch, or a fridge, or a new TV, they are less likely to repeat this kind of purchase the next year.

“This is one explanation why household goods spending might be weaker at the moment,” she explained.

She added that the reduction in “leftover money” after rising household bills and expenses, as well as rising mortgage payments, is also an influence.

“Not only have many people already purchased some of these durable goods, others may see home-related purchases as an easy decision to delay while money is tighter,” Ms Timbrell stated.

Reasons and for the change-up

While the ANZ-observed spending included strong annual growth in discretionary services but much weaker discretionary goods spending compared to last time this year, it proffered that “it seems the weaker spending has been caused by a mix of two issues”.

Firstly was a retail hangover, where travel restrictions through 2020 and 2021, rapid gains in housing wealth through 2021 and low interest rates all strengthened spending on non-food retail and durable goods, the major bank explained.

“This may have left a spending gap for the usual upgrade cycle on a range of home-related items,” Ms Timbrell stated.

“Spending on home-related goods has been particularly weak.”

Secondly, there was household ‘budget squeeze’, where very strong inflation (which ANZ expects to be 7.7 per cent year-on-year (YoY) through 2022) and rising interest rates are “reducing discretionary buying power for households”.

“We expect household caution to continue as interest rates rise further,” she explained.

Spending breakdown and trends

According to the ANZ data, within ‘total spending’ — which fell 5 per cent YoY for the week to 21 January — discretionary services spending on entertainment (+37 per cent y/y) and travel (+20.1 per cent y/y) were both far stronger than last January.

It noted that dining (including takeaway food) grew +3.8 per cent y/y, but, in contrast, shopping (non-food retail) fell 11.9 per cent y/y for the week to 21 January.

Most of the weakest performers within shopping were home-related, including electronics (-22 per cent y/y), sports and exercise equipment (-25 per cent y/y), furniture (-12 per cent y/y), and homewares (-13 per cent y/y).

Additionally, clothing retailing fell 7 per cent YoY and beauty goods and services fell 8 per cent YoY.

Groceries strengthened through January though but were still 3.9 per cent lower than the week to 21 January 2022, it confirmed.

[Related: Savings buffers ‘exhausted’, Equifax warns]