Household Spending Holds Strong, Inflation Expectations Sticky

• Household spending finished the year on a firm note. December data from the Household Spending Insights series, published by CBA, showed consumers continuing to spend at a faster pace in 2025 than in recent years.
• Spending increased 0.7% over the month, lifting annual growth to 6.3%. Importantly, every month in 2025 has now delivered positive gains.
• Inflation expectations remain sticky. The latest survey from the Melbourne Institute showed households expecting inflation of 4.6% in January. This is little changed from December and signals that price pressures are still expected to remain elevated.
• Offshore, US labour market data surprised to the upside, with initial jobless claims falling to 198k, the lowest since November and well below expectations.
• Rates moved higher in response, with US Treasury yields rising across the curve. The 10-year increased to 4.16%, while the 2-year lifted to 3.57%.