Retail trade edged up 0.2 per cent in February increasing the likelihood of the Reserve Bank raising interest rates again at its next meeting in April.
The increase in retail trade was only a moderate improvement on January’s 1.8 per cent rise, but when taken together with near record low unemployment and inflation beyond the RBA’s target, it is likely enough for the central bank to consider a further rate hike.
ABS head of retail statistics Ben Dorber said retail spending had moderated after a period of “volatility”, but hospitality continued to see growth.
“On average, retail spending has been flat through the end of 2022 and to begin the new year,” he said.
“Spending in food related industries continued to grow steadily in February, with cafes restaurants and takeaway food services up 0.5 per cent, while food retailing rose 0.2 per cent.”
BIS Oxford Economics Head Macroeconomic Forcaster Sean Langcake agreed with the ABS assessment, but added the “pickup” in hospitality spending could be of concern to the RBA.
“There is nothing too surprising in these data about how the anticipated slowdown in consumer spending is unfolding,” he said.
“There are signs that goods price inflation is cooling, as is consumer spending more broadly. But the ongoing pickup in hospitality spending is a sign of persistence in services demand and inflation.”
The persistence of spending on services is one explanation experts have put forward for inflation remaining above expectations, and raises the spectre of another increase in interest rates when the RBA meets in April.
Spending in household goods remained flat, and Mr Dorber said sales of goods had been “mixed” as consumers tighten their belts in response to high cost of living pressures.
Department store sales rose one per cent in February, while clothing, footwear and personal accessory retailing increased by 0.6 per cent.
All eyes will now be on the ABS’ release of CPI figures on Wednesday morning with the RBA at a crucial juncture as it attempts to balance curbing inflation with harming households and the economy.
Mr Langcake described any decision the bank makes from this point forward as “lineball,” adding that every piece of new information would be intensely examined.
“Each data point on household spending and the labour market will be closely scrutinised,” he said.
Recent volatility in the global banking system also lurks as a potential challenge for the RBA, although experts have been quick to stress they do not expect any major collapses here and that Australia remains at relatively low risk of being impacted by events in the United States and Europe.