Belts have tightened another notch as consumers cut back to combat rising interest rates and cost of living pressures.
Not only have consumers been holding back on nice-to-haves, but spending on essentials has also pulled back based on Visa transaction data.
The firm's spending momentum index sunk 0.9 points to hit 98.8 in May, reversing an improvement over the month before.
All spending categories are now in contractionary territory - that is, below 100 per cent - aside from non-discretionary, or essentials.
These patterns are likely to continue as rising interest rates and red-hot inflation turn people away from restaurants and other non-essential spending in favour of cheaper alternatives like eating in.
At 101.5 index points, non-discretionary spending remains in expansive territory but it did fall 0.7 points over the month.
Discretionary spending contracted a further 0.2 points to 97.5.
The index also revealed a slowdown in spending in restaurants and fuel.
The weak result comes as the Reserve Bank continues hiking interest rates, pulling the trigger on number 12 in just over a year in June.
Consumers have also been weighed down by rising consumer prices, with headline inflation coming in at seven per cent in the March quarter.
The spending slowdown is expected to put businesses under pressure, with insolvency levels already trending up.
External administration was up 35 per cent in the year to May despite a seasonal dip between March and April.
CreditorWatch chalked up this increase to both challenging trading conditions and a surge from lower-than-usual numbers during the pandemic.
Mining was one of the few industries spared.
These troubles continue to plague the construction industry, however, with the rate of external administrations sitting at its highest point since June 2020.
The CreditorWatch business risk index for May also revealed an uptick in court actions, business-to-business trade defaults and credit inquiries.
The firm's chief economist Anneke Thompson said businesses were suffering in the face of rising interest rates, high inflation, weakening demand and declining forward orders.
"The latest monthly inflation and unemployment data suggests that we will be hit with more rate rises in the coming months, adding to the challenge," Ms Thompson said.
