Boomers spend up as young tighten belts
LOS ANGELES: The young are cutting back on spending on clothes and retail services as they grapple with cost-of-living pressures, while older and wealthier households don’t appear to have tightened their belts.
Analysis of the purchasing habits of 7 million CBA customers reveals people under 35 increased their spending by just 3.4 per cent in the year to March 31, which was less than inflation and indicative that the average young person is buying fewer things.
The group under the greatest pressure was 25- to 29-year-olds, whose spending was almost unchanged in value over the past 12 months, even though prices increased by 7 per cent.
But spending among the over-55s increased at an above-inflation rate over the past year, with CBA customers over the age of 75 boosting their spending by about 13 per cent.
Older people are more likely to own their property without a mortgage and benefit from higher interest rates.
The findings are included in a report by CBA and data science company Quantium, which analysed payments as part of a joint venture called CommBank iQ.
While under-35s reduced their spending on retail services such as hairdressers and optometrists by 0.6 per cent, over-35s clocked a 9.7 per cent increase in retail service transactions.
All growth figures are expressed in per person terms, so they are not inflated by the influx of migrants.
The data also suggest that strong growth in spending at cafes and restaurants identified in official Australian Bureau of Statistics data has been driven by older cohorts, who are spending 18 per cent more on dining out than last year, compared to a 7.1 per cent lift among under-35s.
CommBank iQ head of innovation and analytics Wade Tubman said the data revealed the diversity of ways that households were responding to cost-of-living pressures.
“What we’re seeing is a continued COVID rebound effect, with consumers catching up on the experiences that they missed out on during the pandemic,” he said.
“It seems counter-intuitive that at a time of increased cost-of-living pressures, consumers are choosing to boost their discretionary spending.”
Once adjusted for inflation, aggregate spending has declined across most categories, including household goods such as furniture and appliances, as well as clothing and apparel.
The data is broadly consistent with official retail trade data from the ABS, which revealed a 0.6 per cent decline in the volume of items purchased in the first three months of the year.
Eating out, travel and entertainment are the only discretionary areas that have experienced real increases in spending, according to the Commonwealth Bank.
Travel and accommodation spending is 39 per cent higher over the year, while spending at restaurants is up by 8.5 per cent.
“What we’re seeing is a COVID rebound effect; a continued desire even as late as March 2023 for consumers to catch up on the experiences that they missed out on during COVID,” Mr Tubman said.
“Some customers are drawing down on savings buffers they accumulated during COVID-19. For others, they are choosing to be frugal in some areas so they can continue to prioritise experiences.”
The only areas of essential spending where purchases have increased in real terms are medical services, which have increased by 12.5 per cent, and public transport, which is up 9.4 per cent.
Spending at supermarkets has increased by 4.5 per cent over the past year, which is less than inflation and suggests that people have cut back on groceries or shifted to buying cheaper products.