Consumer stress is rising again due to the cost of living, but employment pressures are at their lowest level in 4 years. Purchase expectations are dropping sharply, especially for travel.
The NAB Consumer Stress Index increased for the second consecutive quarter to 56.4 pts in Q2 2022, compared to 55.7 pts in Q1. Rising stress was again largely associated with growing concern over the cost of living, which jumped another 2.3 pts in the quarter to 67.0 pts – its highest level since Q4 2018. Overall consumer stress remains lower than the same quarter a year ago (57.8 pts), and is well below the survey average (58.7 pts). While there was an increase in stress related to government policy (up 1.1 pts over the quarter to 61.1 pts), stress related to job security eased further for reach a 4-year low of 41.4 pts. Consumer stress related to retirement funding remained unchanged (56.4 pts), while stress related to health was slightly lower (-0.6 pts to 54.7 pts). The “stress gap” between the lowest incomes (up 1.2 pts to 61.8 pts) and the highest (down 0.6 pts to 52.9 pts) widened to 8.9 pts in Q2 after tightening over the past four quarters. The unemployed or those who have lost their main source of income due to COVID (68.2 pts) continue to have the highest stress of all groups by far.
More and more Australian consumers are noticing price increases in a number of key categories. Grocery prices topped the list, with +72% net of consumers noting higher prices over the past 3 months (compared to +50% at the same time last year). With the easing of travel and work restrictions and rising gasoline prices, transportation costs come second (+66%), followed by utility costs (+59%). Not only are consumers noticing price increases more, they are also changing their consumption and lifestyle habits in an attempt to deal with them (see NAB Consumer Insights: Impacts of Cost of Living Pressures on Consumer Spending and Lifestyle).
Consumer expectations for major household purchases over the next 12 months also fell sharply in the second quarter across all spending categories. Despite concerns about inflation and the cost of living, until recently this had not had a significant impact on spending intentions in some categories, particularly travel. Although planned holiday spending remains slightly positive, it is down sharply from the previous quarter. Significantly more consumers also said they expected to spend less on home renovations and major household items.
NAB Group Director for Personal Banking, Rachel Slade, acknowledged that some people may be feeling the cost of living pressures.
“When we look at our customers, overall they are in a very good position right now – in fact, 70% are ahead of their mortgage payments, giving them financial flexibility. We also know that the security of employment is key to relieving household stress – Australia’s high employment rate at the moment does a lot to put people at ease,” Ms Slade said.
“As a bank, we have never been better placed to help. The creation of our NAB Assist team in 2016, combined with smart analytics, allows us to quickly identify customers who may need our help so that we can get in touch with them.
“There are many things we can do to help, from discussing flexibility around home loan repayments to providing bespoke budgeting tools.”