January spending takes a hit but things are looking up for 2022

After record card spend at the end of 2021, The CommBank Household Spending Intentions Index fell 10% in January, with the biggest declines seen in credit card and debit card spending on retail, entertainment and household services.

CommBank creates the Household Spending Intentions Index through combined analysis of CBA payments data (Australia’s largest consumer spending data set - covering approximately 40% of payment transactions) and loan application information.

The Omicron variant outbreak was a key contributor to this drop, with a monthly decline during January. That said, most spending categories remain higher than in January 2021, with the exception of home buying, entertainment and communications, which remain lower than a year ago.

Retail fell 20.9% in January, after a number of months of improvement, due largely to seasonal factors, such as Black Friday and Christmas shopping. Despite the month-on-month fall, retail spending intentions are 4.4% higher than January 2021, showing that the recovery remains intact.

January 2022 entertainment spending overall was 18% lower than in January 2021, marked by declines in spending on bars and nightclubs, music stores, amusement parks, bowling alleys and art galleries - likely due to Omicron.

Household services spending weakened 14.4% in January 2022, after previous strong gains. The fall in January likely relates to a reluctance to have home visitors due to the spread of Omicron. Relative to January 2021, January this year saw spending increases on vets, child care, swimming pools and landscaping.

The Household Spending Intentions Index in January had returned to levels close to September 2021, during the Delta lockdowns, but CBA Chief Economist, Stephen Halmarick noted that in spite of this he expected a continued economic recovery.

“It is no surprise that spending intentions fell more than usual in January due to the spread of Omicron, with the biggest declines seen in the retail, entertainment and household services sectors,” he said.

“Despite this, the index remains 1.4% higher year on year, supporting our view that the economy continues to recover from the worst of the Covid-related slowdown.”

CommBank’s latest credit and debit card data ending 4 February shows a pick up in spending growth, suggesting consumer spending hit a low in early January and has been steadily improving since.

“We continue to expect the Australian economy to grow by close to 5% in 2022,” Halmarick said.