Australian household spending rises meagre 0.1% in April

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SYDNEY (Reuters) -Australian household spending rose only marginally in April, data showed on Thursday, a further sign consumption was still lagging income growth despite a drop in borrowing rates and cooling inflation.

The Australian Bureau of Statistics’ monthly household spending indicator (MHSI) showed a seasonally adjusted rise of just 0.1% in April, after a dip of 0.1% in March.

Household spending for April fell in four of the nine categories measured by the ABS, with notable declines in clothing and tobacco and alcohol.

“Spending on goods fell by 1.1%, with households buying less clothing and footwear and new vehicles,” noted the ABS.

“Spending on recreational and cultural activities, health, and dining out contributed to a 1.5% rise in services spending.”

Annual growth slowed a fraction to 3.7%, a historically miserly pace particularly given solid population growth of around 1.7%.

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%.

The Reserve Bank of Australia (RBA) already had to slash its consumption forecasts when it cut interest rates by a quarter point to 3.85% in May, and will now likely have to downgrade the outlook even further.

Markets are wagering the RBA will ease again as early as July, and see rates bottoming around 2.85% by early next year.

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 Tom Hogue)