SYDNEY (Reuters) -Australian household spending rebounded in May after three months of weakness, as consumers snapped up clothes and cars in a sign lower borrowing costs and rising real incomes might finally being felt.
The Australian Bureau of Statistics’ monthly household spending indicator (MHSI) showed a seasonally adjusted rise of 0.9% in May, when analysts had looked for an increase of around 0.5%. That followed a flat April and a 0.1% dip in March and left annual growth modestly higher at 4.2%.
“Discretionary spending rose 1.1%, as households spent more on clothing and footwear, new vehicles, and dining out,” said Robert Ewing, ABS head of business statistics. Discretionary spending had fallen in both of the previous two months.
The improvement was in contrast to data showing retail sales alone rose just 0.2% in May, half the gain expected by markets.
Household spending comprises around 52% of gross domestic product but made only a minor contribution to growth in the first quarter when the economy expanded by a meagre 0.2%.
Financial markets are still convinced the Reserve Bank of Australia will cut interest rates again when it meets next week, given consumption growth remains short of its forecasts and inflation slowed markedly in May.
Futures imply around a 97% chance the RBA will trim its cash rate by 25 basis points to 3.60%, the third easing this cycle.
The MHSI series will replace the current retail sales report from July and is much broader in scope, covering 68% of household consumption, more than double the retail survey.
It includes spending on many services and should offer a better guide on what to expect from household consumption in the gross domestic product report.
(Reporting by Wayne Cole; Editing by Jamie Freed)
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