Where Aussies are spending their money, and the ASX shares that could benefit
A woman uses her phone to pay at the counter, with a queue of more customers behind.
Australian households are driving certain areas of the economy, with some sectors seeing growth, according to Commonwealth Bank of Australia (ASX: CBA). It's not confirmed, but some ASX shares could be benefiting.
CBA has released its monthly household spending insights for May, which showed a 1.1% increase in spending after a 1% fall in April. The monthly average has only gained 0.1% since January, which suggests a "weak consumer environment" according to CBA. As a comparison, the first four months of 2023 saw a growth rate of 0.8%.
Strong performing sectors
CBA revealed nine of the 12 spending categories rose in May.
There was a 2.3% increase for household goods, 1.8% for food and beverage goods, 1.7% for hospitality and 1.3% for transport. These sectors were "weak" in April, according to CBA.
Communication and digital saw a 1% monthly rise, recreation saw a 0.7% increase, insurance 0.6%, household services 0.5%, and health 0.5%.
In terms of household goods, food and beverage, there are a few ASX shares that come to mind that may be benefitting, including JB Hi-Fi Ltd (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN), Wesfarmers Ltd (ASX: WES), Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW) and Metcash Ltd (ASX: MTS).
Looking at some of the other spending categories that have seen growth, I'd point to names like Qantas Airways Limited (ASX: QAN), Transurban Group (ASX: TCL), Telstra Group Ltd (ASX: TLS), Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN) that could have experienced a solid May.
Weak sectors
There were three sectors that suffered a decline in CBA's monthly spending insights.
Motor vehicles suffered a 0.6% monthly decline, utilities saw a 1% drop, and education suffered a 1.8% decline.
It's possible for ASX shares to deliver a stronger performance within their business than the wider sector because they're usually the biggest and strongest in the industry, giving them an economic moat. They could also have better brand power and win market share in a decline.
Some of the ASX shares that may be facing headwinds include car dealership business Eagers Automotive Ltd (ASX: APE) and utility businesses AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG), at least in the short-term.
Where could spending go next?
CBA senior economist Belinda Allen noted that the consumer environment remains soft despite the spending rise in May. She said:
When looking at spending trends since January however, we can see that the consumer spending environment remains muted, having risen by just 0.1 per cent per month on average since January and driven in large part by spending on essential categories like insurance, utilities and transport. This suggests that consumers are still needing to make spending choices and are prioritising essential purchases.
It is unlikely tax cuts commencing in the third quarter of 2024 will have a material impact on consumer spending and we are expecting households to save rather than spend their tax cut. Looking forward, the key for consumption will be growth in real household income, and the first quarter 2024 National Accounts data indicated this remains weak.
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Motley Fool contributor Tristan Harrison has positions in Metcash. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Coles Group, Harvey Norman, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Eagers Automotive Ltd, Jb Hi-Fi, and Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.