SYDNEY, Dec 4 (Reuters) – Australian household spending surged by the most in almost two years in October as bargain hunters snapped up sale items, giving the fourth quarter a solid start and supporting the outlook for growth.
Three-year bond yields rose 5 basis points to 4.035%, the highest since January. Investors now see a split chance of a rate hike in May next year, with a total tightening of 30 basis points by the end of 2026, up from about 25 bps before.
Data from the Australian Bureau of Statistics on Thursday showed its monthly household spending indicator (MHSI) jumped 1.3% in October to A$78.4 billion ($51.77 billion), following a rise of 0.3% the previous month.
The annual pace of spending growth picked up to 5.6% from 5.1%.
“Discretionary spending surged this month led by goods as promotional events saw households spend more on clothing, footwear, furnishings and electronics,” said Tom Lay, ABS head of business statistics.
“Services spending also rose in October, as major concerts and cultural festivals drove up demand for catering, hospitality and hotel stays in major cities.”
Spending on goods climbed a solid 1.7% while spending on services rose 0.8%.
The Reserve Bank of Australia has cut interest rates three times this year to 3.6% and is considered certain to hold steady next Tuesday and perhaps turn more hawkish on the policy outlook after a surge in inflation in the third quarter.
A stronger consumer is making the RBA’s job harder given the economy could be already operating at the potential growth limit. Adding to the challenge, the consumer mood turned optimistic last month for the first time in almost four years.
Headline inflation accelerated for a fourth straight month to 3.8% in October, while the trimmed mean measure of core inflation also rose to 3.3%, above the RBA’s target of 2-3%.
($1 = 1.5145 Australian dollars)
(Reporting by Stella Qiu and Wayne Cole; Editing by Christian Schmollinger and Sam Holmes)
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