By Stella Qiu
SYDNEY, March 28 (Reuters) – Australian retail sales levelled off in February after wild swings around the year-end holidays, suggesting consumers are reining in spending in the face of higher living costs and rising interest rates.
Consumers continued to spend more on food in February, but there were smaller bounces in discretionary spending such as at department stores, clothing, footwear and personal accessory.
Belinda Allen, an economist at Commonwealth Bank of Australia, expects a further moderation in consumer spending over the coming months as the impact of higher interest rates continues to intensify.
“Together with negative real wages growth, this will impact households’ available cash flows,” she added.
Monthly inflation data to be released on Wednesday could also be a determining factor.
Analyst forecasts consumer inflation likely eased to an annual rate of 7.1% in February, from 7.4% in January.
Other data releases have printed on the strong side. Australia employment rebounded strongly in February, the jobless rate eased back to near 50-year lows, and business conditions remained resilient.
The RBA has already lifted rates by 350 basis points to an 11-year peak of 3.6% and has said further tightening of monetary policy was likely needed.
However, markets suspect that stance might have been overtaken by recent turmoil in the global banking system that threatens to sharply tighten financial conditions.
Investors have all but priced out any chance of a further hike in the cash rate, and even forecast a chance of a cut later in the year. 0#RBAWATCH
But many analysts still think the RBA will hike at least once more, though some believe it might pause in April before moving in May following inflation data for the first quarter.
($1 = 1.4968 Australian dollars)
(Reporting by Stella Qiu; Editing by Jamie Freed)
((yifan.qiu@thomsonreuters.com))
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