The latest monthly data from the Commonwealth Bank Household Spending Intentions (HSI) Series indicates that home buying spending intentions are running at a record rate with early signs suggesting a positive wealth effect is starting to re-emerge. CBA Chief Economist Michael Blythe says the data to the end of December 2019 confirms that the trends of recent months remained in place at the end of 2019.
“The home buying intentions series lifted again and is now at a record high. There are some early signs of a ‘wealth effect’ from the housing market supporting spending on motor vehicles, albeit from a very low level, as well as travel and entertainment,” said Mr Blythe.
Mr Blythe says the home buying HSI readings mean the pick-up in dwelling prices in the second half of 2019 will continue into the first half of 2020, and the residential construction downturn should be approaching bottom. “Past cycles show that leading indicators like building approvals turn about three month after home buying intentions start to lift. A bottoming in the construction cycle would remove a major growth drag on the economy, and also helps retailing.”
However the retail HSI was down in December, with households remaining very cautious about spending at the retail level.
“The flat trend in the retail HSI remains a disappointing outcome relative to the stimulus applied via interest rate cuts, tax rebates and the upturn in dwelling prices. The zig-zag pattern for the retail HSI indicates that the ‘Black Friday’ event brought forward spending from December into November 2019 without necessarily boosting spending overall,” Mr Blythe said.