Households are pulling back sharply on their spending in further evidence families are being squeezed by dramatically higher interest rates.
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Household consumption fell 1.1 per cent in April, dragging the annual rate down to 6 per cent, the smallest such increase since late 2021 and far slower than mid-last year, when it grew by almost 30 per cent.
Evidence of the expenditure slowdown came as the Australian Bureau of Statistics reported a record 9 per cent surge in services exports, due mostly to a huge influx of international students together with an increase in tourist arrivals.
The rise in services exports helped drive the trade surplus to a near-record $41.1 billion and is expected to have limited the downturn in the economy in the first three months of the year.
![Freight prices have declined. Picture Shutterstock Freight prices have declined. Picture Shutterstock](/images/transform/v1/crop/frm/202296158/0c49d88e-38b1-4a30-b257-8f793963f503.jpg/r191_0_991_451_w1200_h678_fmax.jpg)
Figures due out on Wednesday are expected to show the economy grew at an annual pace of around 2.4 to 2.5 per cent in the March quarter. Treasury predicts it will slow sharply during the year as higher interest rates bear down on activity.
While household spending on holidays, entertainment and eating out was still growing at a double-digit pace in April, the ABS said the post-pandemic splurge on travel and personal services was losing momentum.
The ABS's head of business indicators, Kate Lamb, said expenditure on services was "contin[uing] to normalise following the COVID-19 pandemic".
In February, spending at hotels, restaurants, cafes and transport was growing around 26 per cent but by April had slowed to between 13 and 15.5 per cent.
Evidence that demand for services is moderating is significant because the Reserve Bank of Australia has expressed concern that strong services spending has limited the decline in inflation even as goods prices have eased.
In announcing the RBA's latest rate hike to 4.1 per cent, governor Philip Lowe said while the cost of goods was easing, "services price inflation is still very high and is proving to be very persistent overseas".
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The spending result came as the ABS reported the biggest fall in the price of imports in more than 12 years as the pandemic-driven disruption of global supply chains continued to ease, freight prices declined and the cost of fuel fell.
The price drop contributed to a massive trade surplus, which widened to $41.1 billion in the March quarter despite declines in the value of many exports. One of the exceptions was lithium, the value of whose exports reached a record high thanks to swelling global demand.
The figures show the economy is also continuing to benefit from strong international demand for the commodities Australia exports.
The terms of trade, which refers to the ration between export and import prices, grew by 2.8 per cent in the March quarter, keeping it close to the record high levels reached this time last year. While the prices fetched by exports eased, import prices suffered their biggest fall since late 2010.
Commonwealth Bank economists said while the current account surplus of $12.3 billion was smaller than expected, net exports beat expectations, and suggested annual growth would have reached 2.5 per cent in the first quarter.