Australia’s consumer spending rises in May

Australia’s consumer spending surged in May, breaking a three-month streak of weakness. According to the Australian Bureau of Statistics, the household spending indicator gained 0.9% following a flat April and a drop by 0.1% in March. 

Purchasing activity increased as households spent more on clothing, vehicles, and dining out. Spending on non-essential goods and services rose significantly, pointing to improving consumer confidence. Lower interest rates and higher real incomes boosted retail sales.

Yet, financial markets still price in more interest rate cuts by the Reserve Bank of Australia (RBA), with a 97% chance of a 25-basis-point reduction that would bring borrowing costs to 3.60%. The move is expected to come as consumption has not yet reached the regulator’s target and inflation is slowing.