Latest news with #householdspending
The Guardian
4 hours ago
- Business
- The Guardian
The good news? Household living standards are on the rise. The bad news? Just about everything else
There were early signs that the March GDP figures were not going to be good. To start with, the Bureau of Statistics' new measure of household spending that covers about two-thirds of all household spending had already revealed that spending for the quarter was flat compared with a 1.6% jump in December quarter last year. So household spending was worse. Then last week the private capital expenditure figures revealed a 0.1% fall in investment in buildings and engineering, compared with a 0.2% rise in the December 2024 quarter. So private investment was worse. On Tuesday, the balance of payments revealed that trade in the first three months of this year was expected to 'detract 0.1%pts from the March quarter' compared with adding 0.2%pts in December. So trade was worse. Just to top it off, on Tuesday the figures for government spending and investment showed that public demand fell in the March quarter and would also detract 0.1%pts from GDP growth compared with it adding 0.2%pts to GDP growth last December. So the impact of the public sector was worse. To be honest, once you take away households, private investment, trade and government spending, you really are not left with much. So it came to be. In the March quarter of this year, GDP growth was just 0.2%, down from 0.6% in the December quarter. The only good news is the March quarter last year was pretty dire as well, so all up it meant annual growth remained steady at a still extremely weak 1.3%. If the graph does not display click here This weak growth meant that per capita GDP fell again – the ninth quarter out of the past 11. This is not a good state of affairs, and certainly does not accord with the views of the Reserve Bank back in April when it looked at the first three months of this year and suggested that 'the limited information available about activity in early 2025 suggested that the pick-up in GDP growth had been sustained'. Ahh well, at least they can say they were not wrong for long? Well no. In the minutes of the May board meeting released this week the RBA now suggested that 'GDP growth had increased in the December quarter 2024 and year-ended growth looked to have picked up a little further in the March quarter'. Going from 1.3% growth in December to 1.3% growth in March is hardly 'picked up'. The May Statement on Monetary Policy also predicted annual GDP growth in June of 1.8%. To get to that level, the economy would need to grow in April, May and June by 0.7% – the strongest quarter growth for three years. Here's hoping … So what drove the growth that was there? Households were the biggest contributor to growth – although as in all things the context is key. Their contribution to the growth of the economy in the March quarter was about half what you would normally expect. If the graph does not display click here And a big reason for the increase in consumption was a jump in spending on electricity, gas and other fuels – due to the ending of some of the state government energy rebates (which also had an impact on inflation). That is not the type of spending you want to see driving households. All up the level of household consumption is well down on what would have been expected before the pandemic. The Reserve Bank's interest rate rises did their job – they snuffed out spending. Clearly more rate cuts are needed to undo that damage and it is quite extraordinary that the RBA is so sanguine about it all: If the graph does not display click here Sign up to Afternoon Update Our Australian afternoon update breaks down the key stories of the day, telling you what's happening and why it matters after newsletter promotion The overall level of household spending and private-sector investment quickly rules out the use of the phrase 'strong' when searching for a term to describe what is going on: If the graph does not display click here And that's not surprising because while home loan rates have come down, the average discounted rate is still more than 300 basis point higher than it was at the start of 2022. But for small business owners taking out an overdraft loan, things are even worse – the rate is 400 basis point higher: If the graph does not display click here But let us not be too negative. One very good piece of news is that household living standards are on the rise. After two years, finally household disposable income per capita is above the level it was in March 2020: If the graph does not display click here One reason for this was there was a very slight decline in the level of mortgage repayments, due to the rate cut in February. This cut actually helped increased living standards in the first three months of this year. But that was a very small repair, given since March 2022 mortgage repayments have contributed about 63% of the fall in living standards: If the graph does not display click here That's a sizeable chunk and it reinforces the damage that is done when the RBA so badly misreads the economy as it has. These figures highlight that not only should the Reserve Bank have cut rates in April but having made that error it compounded it by not cutting rates by at least 50 basis points last month. So far this year the RBA has kept misreading the economic situation and erred on the side of caution. Let us hope these weak figures spur it to cut rates when it meets next month and not suggest it still needs more time to see what is going on. Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
News.com.au
2 days ago
- Business
- News.com.au
‘Downward pressure on prices': Silver lining in Trump trade
Aussies households are tipped to slow their spending on the back of US President Donald Trump's tariff policy even though they will likely benefit from cheaper goods and it helped deliver a rate cut in May. In a speech made at the Economic Society of Australia Business Lunch, RBA assistant governor Sarah Hunter said Australia was one of the countries that could benefit from cheaper goods in the short term as weakening growth outweighs rising costs for businesses. 'Overall weaker global growth would put near-term downward pressure on the prices of globally traded goods,' she said. 'For countries that are not imposing higher tariffs, such as Australia, this could flow into import prices, making products cheaper and lowering inflation.' But the Trump tariffs are unlikely to lift anaemic household spending, with Australians tipped to moderate their purchases, while business investment is tipped to stall. 'Greater uncertainty about the future can lead households and businesses to save instead of spending and investing, and this is likely to be the case for Australian households and businesses too,' Ms Hunter said. 'Though the magnitude of these effects is itself very uncertain, this does suggest that global uncertainty may weigh substantially on domestic activity if uncertainty remains elevated.' Ms Hunter said there were various forecasts the RBA had made surrounding the global environment, with the base case showing slower economic growth in Australia, a slightly weaker labour market and the price of tradeable goods to dampen. 'Together, these two outcomes mean that inflation is forecast to be a little lower than the February statement of monetary policy, settling around the midpoint of 2 to 3 per cent target range,' she said. Ms Hunter said the overall economic uncertainty on the back of the Trump policies also added to the 25 basis point rate cut in May. 'These were provided to the Monetary Policy Board to help inform their decision-making; taking all the information into account and considering the risks to the outlook, they decided to cut the cash rate by 25 basis points,' she said. Going forward, Ms Hunter said the central bank would continue to watch the data. Mr Trump announced on April 2 a global tariff policy on just about every trading partner on the basis of evening up the US trade deficit. At a minimum, every country, including Australia, faced a 10 per cent tariff, while 'cheating' countries faced higher tariffs Mr Trump eventually paused the majority of his tariff policy for 90 days due to the damage that was being done to his own economy and money markets. He also faced a challenge in the federal courts over his use of power.
Bloomberg
4 days ago
- Business
- Bloomberg
Charting the Global Economy: US GDP Falls on Larger Trade Hit
The US economy contracted slightly to start the year, largely reflecting a bigger tariff-related trade hit but also a larger downshift in household spending growth than first estimated. In contrast, an export surge help drive the Canadian economy in the first quarter as businesses accelerated shipments ahead of higher US duties. Gross domestic product in India rose at a stronger-than-forecast 7.4% pace.
Yahoo
27-05-2025
- Business
- Yahoo
German consumer confidence creeps up, but shoppers are still wary
Germany's consumer confidence rose for a third consecutive month in May, but the improvement remains moderate as lingering economic uncertainties continue to weigh on households, according to the latest GfK Consumer Climate report powered by Nuremberg Institute for Market Decisions. The forward-looking Consumer Climate index is projected to reach -19.9 in June 2025, up from a revised -20.8 in May. The indicator has now reached its highest level since November 2024, when it stood at -18.4. Nonetheless, sentiment remains deeply negative, reflecting ongoing caution among German consumers. The report shows that rising income and economic expectations are not yet translating into stronger household spending. A modest increase in the willingness to save and a dip in purchase readiness are keeping the overall recovery fragile. 'The level of consumer sentiment remains extremely low, and consumer uncertainty remains high,' said Rolf Bürkl, consumer expert at the NIM. 'The unpredictable customs and trade policy of the US government, turbulence on the stock markets and fears of a third consecutive year of stagnation are reasons why the consumer climate remains weak. In view of the general economic situation, people seem to think it advisable to save.' Indeed, the savings indicator rose by 1.6 points in May to 10.0, reversing part of April's sharp decline. The renewed caution is dampening the positive effect of rising income expectations and economic optimism. Consumers' income expectations rose for the third month running, climbing 6.1 points to 10.4 — the highest level since October 2024. Though slightly below the May 2024 reading, the latest figure underscores increasing optimism about household finances. The improved sentiment is underpinned by robust wage settlements and a mild easing in inflation. The recent pay deal in the public sector, which includes a 3% increase this year and an additional 2.8% in 2026, is helping to support purchasing power. According to the Federal Statistical Office, inflation slowed to 2.1% in April, down from 2.2% in the two previous months. Related Merz's stumble jeopardises hopes of rebooting sluggish German economy German stocks drop as Merz stumbles in historic Bundestag defeat Despite stronger income prospects, German households appear reluctant to increase spending. The willingness to buy index fell by 1.5 points in May to -6.4, reversing part of the gains seen earlier this year. Compared to May 2024, however, the indicator is still up by nearly 6 points. According to the survey, concerns over job security and geopolitical instability continue to cloud consumer sentiment. Rising unemployment and fears of job losses are holding back discretionary purchases, even as real incomes improve. Economic expectations rose for the fourth consecutive month, with the index climbing 5.9 points to 13.1 — its highest level since April 2023. The sustained rise suggests that consumers are cautiously hopeful about a broader economic recovery, despite the backdrop of stagnation. The German Council of Economic Experts, in its latest spring report, forecast no GDP growth for 2025 but expects the economy to expand by 1% in 2026, assuming stabilisation in domestic and global conditions. Futures on the DAX indicate the German stock market is set to open flat on Tuesday, after gaining 1.7% on Monday. The bounce was fuelled by Donald Trump's decision to delay steep tariffs on EU goods, easing trade tensions. The US president postponed a planned 50% tariff hike, initially expected to take effect on 1 June, pushing the deadline to 9 July, following a phone call on Sunday with European Commission President Ursula von der Leyen. The reprieve is especially significant for Germany, whose export-driven economy depends heavily on the US market for key sectors like pharmaceuticals, industrial machinery, and automotive components. The euro traded at $1.1385, also unchanged for the day. On Monday, the single currency hit $1.1418, the highest level in a month. Sign in to access your portfolio
Bloomberg
24-05-2025
- Business
- Bloomberg
Indonesia to Cut Transport and Power Prices to Spur Consumption
Indonesia will cut transport and power costs and deliver other stimulus in June and July in an effort to boost household spending and rekindle economic growth. The government will provide discounts on train, plane and ferry tickets during the school holiday period, as well as toll road fee reductions targeting about 110 million drivers, the Coordinating Economic Affairs Ministry said in a statement Saturday.
