Canberrans have pulled back sharply on their spending amid a nationwide downturn in the purchase of discretionary goods and services.
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After growing at an annual rate of close to 6 per cent in April, expenditure by ACT households has slowed dramatically to increase by just 1.3 per cent in June, the second-weakest outcome in the country. Only Victoria (0.5 per cent) reported a softer outcome.
Miguel Sousa, who works as a barista, said with bills going up, he and his partner have been cutting back on luxuries such as going out for dinners and movies.
"We used to always have a dessert after a meal, not anymore so much. Maybe a biscuit, maybe a home-baked cake - not from the shops anymore."
!['No more desserts', says barista Miguel Sousa. Picture by Gary Ramage 'No more desserts', says barista Miguel Sousa. Picture by Gary Ramage](/images/transform/v1/crop/frm/36gjBk2fMM8Hf5bLgPMdbTm/fecd8676-ea37-4f74-b54e-0de3dab24649.jpg/r0_0_4000_2667_w1200_h678_fmax.jpg)
Mr Sousa said he was also spending less on clothes.
"Instead of just spending $20 on each shirt, that's $100 for five t-shirts for work ... you just buy the $12 shirts and dye them," he said.
Imogen Collyer, an osteopath, said she has switched to a cheaper gym membership option and become mindful of her spending habits. She said she was purchasing smaller treats and has stopped getting takeaway coffees in the mornings.
Nationwide, household spending was up 1.8 per cent in June, which Ben Dorber, head of business indicators at the Australia Bureau of Statistics, said was the smallest increase since February 2021.
"Spending on discretionary goods and services was down for the third straight month, as households adjust to cost-of-living pressures," Mr Dorber said.
By contrast, purchases of essential goods and services rose 4.2 per cent, though the rate of increase has slowed significantly after reaching 21 per cent in January, the ABS statistician said.
![Imogen Collyer says she has switched to a cheaper gym membership. Picture by Gary Ramage Imogen Collyer says she has switched to a cheaper gym membership. Picture by Gary Ramage](/images/transform/v1/crop/frm/36gjBk2fMM8Hf5bLgPMdbTm/cc6fffff-ee23-4693-89bf-b2af8772c815.jpg/r0_204_4000_2462_w1200_h678_fmax.jpg)
The figures confirm that prices of goods is shrinking, falling by 1.2 per cent - the biggest such drop in two years.
But the cost of services is continuing to rise, climbing by 4.6 per cent.
According to the ABS, much of the increase in spending was driven by outlays on child care, health and personal care and food.
More contemporary data suggest there is little reason to expect any pick-up in household spending.
The Westpac-Melbourne Institute consumer sentiment index dropped 0.4 per cent this month to 81 points which Westpac senior economist Matthew Hassan said indicated people were "deeply pessimistic".
An ANZ-Roy Morgan survey found confidence actually fell 3.4 points to 75 points.
ANZ senior economist Adelaide Timbrell said the index had been below 80 points for 23 weeks, which was "the longest weak streak on record".
Ms Timbrell said confidence was particularly low among renters and those with mortgages, reflecting the squeeze being felt by many from high interest rates.
A National Australia Bank survey of business shows the slowdown in consumer spending is being felt by retailers.
NAB chief economist Alan Oster said forward orders in the retail sector were "deeply negative" and although current conditions were solid, confidence among retailers had plummeted and was the weakest of all sectors.
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Nonetheless, Mr Oster said the survey showed that businesses continued to be able to pass higher costs on to consumers, with retail prices rising 2.6 per cent.
Higher costs were being driven, in part, by minimum pay and award changes that came into effect on July 1, the NAB economist said, but said this did not necessarily mean a wage-price spiral was developing.
But a detailed analysis of quarterly and monthly inflation data undertaken by Westpac senior economist Justin Smirk suggests services inflation - the Reserve Bank of Australia's biggest concern - is moderating.
Mr Smirk said data showed that core services inflation slowed from a six month annualised pace of 9.3 per cent last December to 7.4 per cent in March and 4.3 per cent in June.
He said this was consistent with overall inflation cooling to 3.9 per cent by the end of the year and 3.2 per cent by the end of 2024.
KPMG chief economist Brendan Rynne said that although there may a further interest rate hike, the slowdown in consumer spending confirmed the economy was cooling and added to the argument for a further rates pause in September.