Households cut back at the supermarket, but spend big in other areas

The latest CommBank Household Spending Insights Index fell 1 per cent in April to 148.1, as consumers tightened the belt on discretionary spending.

Out of the 12 spending categories, eight recorded a rise thanks to increased spending in areas such as education (up 3.7 per cent), utilities (up 2.5 per cent) and motor vehicles (up 1.7 per cent).

But the increases were offset by significant declines in monthly spending on food and beverage (down 3.8 per cent), hospitality (down 3.3 per cent), recreation (down 2.6 per cent) and transport (down 1.7 per cent).

The data is based on de-identified payments from about 7 million Commonwealth Bank customers, which it says represents about 30 per cent of Australian household transactions.

Household spending has weakened since January when the index was 149.7, the report found.

The annual rate of spending slowed to 2.6 per cent for the year to April, down from 3.9 per cent in March. The downturn was led by a 4.4 per cent monthly drop in discretionary spending.

The ACT had the weakest annual spending growth rate of the states and territories, up 1.1 per cent for the year.

Tasmania had the strongest rate of annual spending growth at 4 per cent.

The report found renters were feeling the pinch, after annual spending grew just 1.3 per cent to April.

In comparison, home owners with a mortgage recorded a 4.5 per cent lift in annual spending and home owners without a mortgage increased their spending by 6.3 per cent.

The annual change in hospitality spending was down 1 per cent in April, from 5.3 per cent in March.

It was the weakest spending on hospitality since August 2021, when much of the east coast was in COVID-19 lockdown.

The biggest contributions to spending in this category in the year to April were for fast food outlets, food delivery services and event planning.

But this was offset by reduced spending at pubs, bars, cafes, restaurants and takeaway foods, the index found.

In the food and beverage goods category, the annual change in spending was down 1.4 per cent, compared to 3.7 per cent in the year to March, due to reduced spending at liquor stores, supermarkets, seafood shops, butchers and confectionery stores.

However, consumers had increased their spending in convenience stores, bakeries, vending machines, health food stores and food box subscriptions.

Canberra business Alpha Fresh has seen an uptick in customers purchasing their fresh food boxes, which are delivered directly to homes.

Together with the wholesale arm of the business, which has supplied restaurants and cafes for almost three decades, Alpha Fresh co-owner Frank Iannelli has a good idea of where people are spending their money.

"We're seeing the average order size of our wholesale customers dropping down and we're seeing a [greater] uptake in the number of customers we have on the retail side," he said.

The company has increased its advertising for its fresh food delivery service since the recent scrutiny on Coles and Woolworths.

"We're definitely picking up a lot of new customers," Mr Iannelli said.

Commonwealth Bank chief economist Stephen Halmarick said the April data painted a picture of a "constrained consumer following an early Easter bump in March".

After another cash rate pause in May, Commonwealth Bank is forecasting the Reserve Bank will lower the cash rate by 25 basis points to 4.1 per cent this year.

"We expect weak consumer spending and below-trend economic growth to continue throughout 2024, and despite recent inflation data surprising to the upside, we anticipate the RBA will cut interest rates in November this year," Mr Halmarick said.