Household Consumption

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EXPERT OBSERVER
Large falls in consumption-based spending post COVID-19 containment measures continued into May and across most industries (with some exceptions such as Construction), although the pace of decline looks to have stabilised.
Business payment inflows however have weakened further across most industries, and remain deeply negative in key parts of the economy (particularly Accommodation &amp; Food Services).
Consumption-based spending has stabilised in recent weeks, but is still down some 15% overall since the start of the year.
The rate of decline in spending has slowed in all states and territories, with the heaviest falls since the start of the year now in the ACT.
By industry sector, consumption spending over the year to date is down most in Administration &amp; Support Services, including Travel Agents (-88.9%), Accommodation &amp; Food Services (-56.0%) and Health Care &amp; Social Assistance (-40.3%).
Spending has grown in a handful of industries - Construction (28.3%), Utilities (7.2%) and Retail Trade (1.9%).
Some sub-industries have seen solid spending growth including Internet Publishing &amp; Broadcasting (39.9%), Construction Services (23.4%) and Gambling (22.4%). But some - Motion Picture &amp; Sound Recording Activities (-98.3%), Administration Services (-90.1%) and Other Transport (-88.2%) - are down heavily.
Business payment inflows into NAB merchants have also fallen sharply.
Business payment inflows into NAB merchants fell in May (-8.6%), after growing in the first 4 months of the year.
Inflows into Corporates were positive but have halved since April, and are falling for small, medium and large firms.
By industry, inflows are still falling most in Arts &amp; Recreation Services (particularly Amusement &amp; Other Activities and Sports &amp; Physical Recreation) and in Accommodation &amp; Food Services (particularly clubs), but at a slower rate. Inflows however rose sharply in Manufacturing (particularly in Pulp &amp; Paper Manufacturing).
ALAN OSTER is the NAB Group Chief Economist
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Large falls in consumption based spending continue into May: NAB's Alan Oster

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NAB data shows dramatic falls in consumption-based spending and business payment inflows post COVID-19 containment measures, with the pace of decline continuing to accelerate quite rapidly across many industries.
Spending in the year to date has fallen heavily in all states and territories, with Victoria leading the way.
By industry sector, spending is down most in Administration &amp; Support Services, Accommodation &amp; Food Services and Transport, Postal &amp; Warehousing, with Construction the only sector recording growth.
A handful of sub-industries have seen spending growth including - Internet Publishing &amp; Broadcasting, Construction Services, Gambling Activities, Food Retailing and Building Cleaning &amp; Pest Control. Business payment inflows into NAB merchants have also fallen sharply.
Corporates continue to outperform (particularly compared to medium and small business) and inflows remain positive, but have fallen steeply in April.
By industry, the hit to inflows has been most apparent in the Accommodation &amp; Food Services (particularly Clubs, Pubs, Cafes, Restaurants &amp; Takeaway Food) and Arts &amp; Recreation Services (particularly Amusement &amp; Other Activities and Sports &amp; Physical Recreation) - sectors that have borne the brunt of forced business closures and social isolation measures.
Inflows are also down heavily in Mining.
Inflows are holding up best in Wholesale Trade - the only sector recording growth in inflows.
Other industries holding up comparatively well include Health Care &amp; Social Assistance and Professional, Scientific &amp; Technical Services, although payment incomes are well down on the previous month.
Big falls have also been recorded in parts of Retail including Clothing, Footwear &amp; Personal Accessories, Department Stores and Motor Vehicles. Only two sub-sectors reported positive gains in payment inflows - Specialised Food Retailing &amp; and Hardware, Building &amp; Garden Supplies.
 Overall, consumption spending has fallen 19.5% (not seasonally adjusted) since the start of the year. Spending over the year to date has fallen heavily in all states and territories. The steepest falls over the year to date are in VIC (-23.0%), followed by the ACT (-20.7%), WA (-20.5%) and NSW (-20.4%). Spending is currently holding up best in TAS (-14.9%) and the NT (-15.0%).
 During these extraordinary times we have taken the decision to publish aggregated customer datacategorised by industry segment with the view of helping to provide clarity around which segments of theeconomy have been most affected by the broader macroeconomic trends at play. NAB takes data privacy veryseriously. All customer transaction data has been aggregated and no individual’s data is specificallyidentified or analysed as part of this process. The data used in this report will not be sold or made publiclyavailable, but insights from the data will be shared with the Australian people.NAB data shows dramatic falls in consumption-based spending and business payment inflows post COVID-19containment measures, with the pace of decline continuing to accelerate quite rapidly across manyindustries.Spending in the year to date has fallen heavily in all states and territories, with Victoria leading the way. Byindustry sector, spending is down most in Administration &amp; Support Services, Accommodation &amp; FoodServices and Transport, Postal &amp; Warehousing, with Construction the only sector recording growth. Ahandful of sub-industries have seen spending growth including - Internet Publishing &amp; Broadcasting,Construction Services, Gambling Activities, Food Retailing and Building Cleaning &amp; Pest Control.Business payment inflows into NAB merchants have also fallen sharply. Corporates continue to outperform(particularly compared to medium and small business) and inflows remain positive, but have fallen steeply inApril. By industry, the hit to inflows has been most apparent in the Accommodation &amp; Food Services(particularly Clubs, Pubs, Cafes, Restaurants &amp; Takeaway Food) and Arts &amp; Recreation Services (particularlyAmusement &amp; Other Activities and Sports &amp; Physical Recreation) - sectors that have borne the brunt offorced business closures and social isolation measures. Inflows are also down heavily in Mining.Inflows are holding up best in Wholesale Trade - the only sector recording growth in inflows. Otherindustries holding up comparatively well include Health Care &amp; Social Assistance and Professional, Scientific&amp; Technical Services, although payment incomes are well down on the previous month.Big falls have also been recorded in parts of Retail including Clothing, Footwear &amp; Personal Accessories,Department Stores and Motor Vehicles. Only two sub-sectors reported positive gains in payment inflows -Specialised Food Retailing &amp; and Hardware, Building &amp; Garden Supplies
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Consumption spending down 20% due to COVID-19 measures: NAB

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The Reserve Bank (RBA) last week released the minutes of the Monetary Policy Meeting for February 2019.
One of the things that really stood out for me was the commentary relating to the housing market, specifically relating to the impact of falling prices. The following quote is taken straight from the minutes:
"From a longer-run perspective, members assessed that, following such large increases in housing prices, the effect of the recent price falls on overall economic activity was expected to be relatively small. However, members observed that if prices were to fall much further, consumption could be weaker than forecast, which would result in lower GDP growth, higher unemployment and lower inflation than forecast. From a financial stability perspective, tighter lending standards, an improving labour market and low interest rates were all likely to support households' capacity to service their debt. Few households were in negative equity positions despite the falls in housing prices, implying that banks' losses would be limited even if household financial stress were to become more widespread."
<a href="https://www.propertyobserver.com.au/images/2019/2/26/household%20consumption%201%20.png" target="_blank">Click here</a> to enlarge: 
<img src="https://www.urban.com.au/images/2019/2/26/household%20consumption%201%20.png" alt=""> 
While it would be great to know how much further the RBA believes dwelling values would have to fall to start affecting consumption, it is looking inevitable that dwelling values will fall further over the coming months. As the above chart shows, values have now declined from their peak across each of the five largest cities in Australia, values have also recorded a significant decline over recent years in Darwin, and a more recent monthly fall in Hobart. Many other regions, including regional areas of most states and territories have recorded falls in dwelling values, with values in Regional Qld and Regional WA sitting lower than their peak for more than a decade now. The decline in dwelling values doesn’t appear to be close to finding a floor yet. This is particularly the case in the two largest markets of Sydney in Melbourne. In fact, if anything the rate of decline in both of these cities has been accelerating over recent months.
 <img src="https://www.urban.com.au/images/2019/2/26/household%20consumption%202.png" alt="">
The concerns about the impact of a declining housing market on household consumption are well founded. Household consumption accounts for more than half of gross domestic product (GDP) so if consumption slows, it is very likely that economic growth will also slow. To-date household consumption has been steady however; consumption isn’t growing as it did before the financial crisis and it has slowed over recent years.
<img src="https://www.urban.com.au/images/2019/2/26/household%20consumption%203.png" alt=""> 
At the same time as consumption has underperformed, the household saving ratio has reduced over recent quarters, highlighting that households are saving less.  While the ratio has not fallen to the lows recorded during the 2000s it is clear that households are saving a lot less than they were initial post-GFC and this is despite inflation remaining consistently below 2%. To-date the reduction in saving has not provided a boost to household consumption and in fact, more regularly released retail trade data shows that expenditure at the shops has reduced which doesn’t bode well for consumption figures going forward.
<img src="https://www.urban.com.au/images/2019/2/26/household%20consumption%204.png" alt=""> 
 
Over the 2018 calendar year, retail trade increased by 2.8%. By comparison, compound annual growth in retail trade over the past decade has been recorded at 3.3%. NSW where dwelling values are recording the greatest declines has seen retail trade increase by 1.7% over the past year, the slowest annual rate of change since March 2012. Not only is NSW the largest and most expensive housing market, it also accounts for almost one-third of national retail trade. If trade continues to slow in the largest state, it is unlikely to bode well for household consumption going forward. Given the already declining housing market, which looks set to continue, slower household consumption, below target inflation, reduced household savings and slowing retail trade, it looks likely that household consumption growth will slow further over coming quarters. As the RBA states that could lead to slower economic growth and in-turn necessitate an interest rate cut. The RBA board next meets on the 5th March. Between then and now a raft of additional data will be released including: the CoreLogic Home Value Index, private sector credit data, building approvals data and a range of inputs for the National Accounts. Unfortunately, National Accounts will not be released until the day after the RBA board meeting however, they will have plenty of new information to assess. Will it be weak enough to necessitate a rate cut? Who knows, but with the RBA shifting to a more neutral interest rate outlook, a run of poor data could see the next RBA meeting become ‘live’ for a rate cut despite not having the full data from the National Accounts until the following day. Personally, I don’t think the RBA will be ready to cut official interest rates next month but with each data release I am more convinced a rate cut is looking more likely. In fact, labour force data which has been showing an ongoing decline in the unemployment rate is the only data release which is overly positive at the moment.
Cameron Kusher is a Research Analyst at CoreLogic.
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Consumption could slow with expectations of further housing value falls: Cameron Kusher

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<img src="https://counter.theconversation.edu.au/content/81084/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Household energy use is a significant contributor to global carbon emissions. International policy is firmly moving towards technology-rich, low- and near-zero-energy homes. That is, buildings designed to reduce the need for additional heating, cooling and lighting. They use efficient or renewable energy technology to reduce the remaining energy use.
But what about the experiences of people who live in homes of this standard? Are these homes comfortable, easy to operate, and affordable? Do people feel confident using so-called smart energy technology designed for low energy use? What support systems do we need to help people live in low-energy, low-carbon houses? 
We worked with other Australian and UK researchers to understand what it’s like to live in purpose-built low-energy housing. As part of this project, researchers from Sheffield Hallam University and the University of Salford in the UK visited South Australia to collect data from Lochiel Park Green Village, one of the world’s most valuable living laboratories of near-zero energy homes. 
Lochiel Park’s 103 homes were built in the mid-2000s to achieve a minimum of 7.5 energy efficiency stars. They’re purpose-built to be a comfortable temperature year-round, and are packed with a solar photovoltaic system, solar hot water, a live feedback display to show households their energy use, plus a range of water- and energy-efficient appliances and equipment. Combined, these systems reduce both annual and peak energy demand, and supply much of that energy at a net zero-carbon impact.
To reciprocate, we spent several weeks investigating similar examples of niche low-energy housing developments in the Midlands and the North of England. We listened to the stories of people living in low energy homes, who experience the difference on a daily basis, and from season to season. They help us look beyond the dollars saved or percentage of emissions reduced; for them the impact of low-energy homes is personal.
This research provides new insights into the relationship between people, energy technologies and low-carbon buildings. For example, one elderly householder told us that moving into a dry and warm low-energy home allowed their grandchildren to come and stay, completely changing their life, and the life of their family. 
Low-energy homes create a wide range of physical and mental changes. Several households spoke about health improvements from higher indoor air quality. Even the idea of living in a healthier and more environmentally sustainable home can prompt lifestyle changes – one woman in her mid-50s told us she gave up smoking after moving into her low-energy house because she felt her behaviour should match the building’s environmental design. She also shortened the length of her showers, reduced her food wastage, and lowered her transport use by visiting the supermarket less often.
Purpose-built low-energy homes also give economic empowerment to low-income households. One household told us that savings on energy bills let them afford annual family holidays, even overseas. This economic benefit matches our findings in other Australian examples.
As researchers, we might dismiss this as a macro-economic rebound effect, voiding many of the energy and environmental benefits. But to that household the result was a closer and stronger family unit, able to make the types of choices available to others in their community. The benefits in mental and physical wellbeing are real, and more important to that family than net carbon emission reductions.
Although international policy is firmly moving towards technology-rich, low-energy homes, our research shows that not all technology is user-friendly or easy to understand. For example, some households were frustrated by not knowing if their solar hot water system was efficiently using free solar energy, or just relying on gas or electric boosting. Design improvements with better user feedback will be critically important if we are to meet people’s real needs.
This research highlights the importance, in the transition to low-energy and low-carbon homes, of not forgetting the people themselves. Improving real quality of life should be the central focus of carbon-reducing housing policies.
<a href="https://theconversation.com/profiles/stephen-berry-7082" target="_blank">Stephen Berry</a> is research fellow, University of South Australia.
<a href="https://theconversation.com/profiles/david-michael-whaley-390397" target="_blank">David Michael Whaley</a> is research fellow in Sustainable Energy and Electrical Engineering, University of South Australia.
<a href="https://theconversation.com/profiles/trivess-moore-12580" target="_blank">Trivess Moore</a> is research fellow, RMIT University.
All are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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Household Consumption

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