With the price of a dozen eggs potentially to surge to as high as $15 a carton, consumers have become choosy with their spending.
According to the latest report by Australian Bureau of Statistics (ABS), discretionary spending was 0.6% lower in comparison to May 2022.
The report showed furnishings and household equipment as having taken a hit of 4.8% less spending for the year, whereas shoes and clothing dipped by 3.4%.
One bright spot was that household spending was up overall by 3.3% but consumers are cutting costs other ways specifically in health, food, and transportation categories.
Within the Westpac-Melbourne Institute Consumer Sentiment Index, the index showed an increase by 2.7% perhaps hinting at the optimistic nature of consumers less worried about market uncertainty.
The Westpac chief economist Bill Evans, however, warned that before the stalling of the Reserve Bank of Australia’s (RBA) decision this month, that the consumer economic attitude was really more optimistic before the July rates pronouncement.
“The RBA’s decision to pause in July does not appear to have resonated with consumers,” he said.
Also hitting Australian consumer budgets is the sustained inflation, according to ABS, which effects several categories. Food prices have risen by 8% while health is up by 5.3% and transport costs increasing by 4.3% the data shows.
“I have seen this trend before, and it happens in this order: households stop shopping for their home first, then they stop spending on themselves, then they start focusing on essentials,” said Australian Retailers Association chief executive Paul Zahra.
Retail earnings are also anticipated to decrease with UBS experts feeling it necessary to reduce its earnings outlook for JB Hi-Fi, Harvey Norman, Lovisa and Universal Store.
“In addition to avoiding big ticket retailers [like Harvey Norman], we also avoid retailers that sell to middle Australia or that have been beneficiaries of a more exuberant consumer during COVID,” UBS analysts had written.
Despite the expected decrease in revenue, National Australia Bank’s June commercial survey revealed that business conditions stabilised staying over long-term average levels.
