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Imagine being able to see into the future

(Source: Supplied)

Having a better understanding of what your customers want to buy and when could take the guesswork out of sales forecasting, inventory management or staff rostering. And gaining unique insights into consumers’ likely purchasing behaviour is now possible through the CommBank Household Spending Intentions (HSI) Index.

The CommBank HSI Index uses advanced analytics to help retailers better understand consumer or household spending intentions. As a window into future spending patterns across the economy and the only model of its kind globally, it can help retailers plan their operational strategies with greater confidence.

Initially launched in July 2019 by CommBank’s Global Economic and Markets Research team, and expanded in November 2021, the CommBank HSI Index has foreshadowed actual spending with a high degree of reliability. Notably, it has achieved a correlation of 0.90 with the annual change in the Australian Bureau of Statistics’ (ABS) National Accounts nominal household final consumption over recent years. 

“Our new CommBank HSI Index is a major improvement on existing consumer sentiment trackers and brings timely and unique insights to retailers,” said Stephen Halmarick, Chief Economist at Commonwealth Bank. “In time, we see this index becoming an important economic indicator for Australian consumer markets.”

Covers the vast majority of household spending

The HSI series now covers 12 household spending categories, including:

  • Home Buying
  • Retail
  • Travel
  • Health & Fitness
  • Entertainment
  • Education
  • Motor vehicles
  • Financial and Insurance costs
  • Transport
  • Utilities
  • Communications and Digital Streaming
  • Household Services

Combined, they capture every category covered in the ABS’ National Accounts and the majority of Australian household spending activity. With this data, retailers can identify the variations in likely consumer spending at an economy-wide and industry level. 

Transaction data plus search activity

The CommBank HSI Index’ predictive properties come from combining CommBank’s consumer data set, the largest in Australia, with Google Trends publicly available search activity. 

“CommBank draws on its anonymised and aggregated card spending data covering 2.5 million households, which gives it visibility of up to 40 per cent of all consumer payment transactions, using credit and debit cards, Eftpos, BPay and direct debit,” said Halmarick. “It also uses data on loan applications for property, travel and motor vehicles.” 

Compared with solely using transaction data, incorporating Google Trends publicly available search activity improves the model’s predictability by 15 per cent, on average, across the index’s 12 spending categories.

Retail spending intentions 

Many consumer sentiment surveys capture what people say they will do, but this can be different from what they actually do. The CommBank HSI Index is a more reliable indicator of future consumer spending that retailers can incorporate into their demand forecasts.

For November 2021 the highlights of the Retail index include:

Retail spending intentions continued to improve in November, up a further 9.6%/mth after solid increases in October as the NSW and Victorian economies re-opened from the Delta lockdowns. Relative to November 2020, the Retail spending intentions index was up a solid 5.6%/yr and is now up 21% from the Delta lockdown low in August 2021.

Gains on the year were driven by increases in spending on: department stores, men’s & women’s clothing, furniture & household equipment, electronic stores, household appliances, jewellery & watch stores, pet shops, shoe stores, newsagency, hardware, florists and luggage & leather goods. This was partly offset by softness in: packaged alcohol, window coverings, nursery & garden supplies, arts & crafts and antique stores.

The gain in the Retail spending intentions index in November points towards a strong Christmas shopping period. This will be supported by the accumulation of excess household savings during the Covid-19 period, which CBA estimates at $240 billion as at Q3 21.

There are varied market views on the strength of Christmas spending this year amid the economic recovery. In that regard, the HSI can provide an anchor point for retailers keen to anticipate actual consumer spending and adjust their strategic responses.

Look further ahead with data-driven insights into consumer spending

On the second Tuesday of each month, the CommBank HSI Index will be published to show both the monthly and annual percentage changes. Additionally, each of the individual 12 spending categories will have its own index, based at 100 in July 2017. An index number over 100 indicates that Household Spending Intentions are higher than in July 2017, while a reading below 100 indicates weaker spending.

Halmarick encourages retailers to keep an eye on the CommBank HSI Index. “We see it as a major step forward in the data available to our customers.” Based on sophisticated data analytics and modelling, the CommBank HSI Index helps provide unique, near real-time insights into the current and future state of household spending. It is another example of how data and analytics can help retailers plan with confidence. 

To learn more about November’s results you can read the full report including disclosures and disclaimers https://www.commbankresearch.com.au/s/desks

For more information please visit commbank.com.au/hsi 


Disclaimer: Important information: This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information. The information in this article and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its publication but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this article. All customer data used, or represented, in this report is anonymised and aggregated before analysis and is used, and disclosed, in accordance with the Commonwealth Bank’s Privacy Policy. Commonwealth Bank of Australia ABN 48 123 123 124. AFSL and Australian Credit Licence 234945.