Australia retail sales level off in Feb as shoppers rein in spending By Reuters

By Stella Qiu

SYDNEY (Reuters) – Australian retail sales levelled off in February after wild swings around the year-end holidays, suggesting shoppers are reining in spending in the face of higher living costs and rising interest rates.

Data from the Australian Bureau of Statistics (ABS) on Tuesday showed retail sales rose just 0.2% in February, compared to a revised 1.8% rise in January. Sales of A$35.14 billion ($23.48 billion) were 6.5% higher than a year earlier.

The figure beat median forecasts of a 0.1% rise, pushing the local dollar to $0.6673, up 0.3% for the day.

However, the data confirmed that Australian consumers are clearly slowing purchases, with inflation-adjusted spending on goods falling on higher prices.

“On average, retail spending has been flat through the end of 2022 and to begin the new year,” said Ben Dorber, ABS head of retail statistics.

The soft print countered some recent strong data releases, painting a mixed economic picture for a data-dependent Reserve Bank of Australia (RBA), which has said it would consider pausing at the April policy meeting to assess the impact of 10 consecutive rate hikes.

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.

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 given inflation remained too high, the labour market was tight and business surveys showed solid activity.

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.

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.

Australia employment rebounded strongly in February, the jobless rate eased back to near 50-year lows, and business conditions remained resilient, with sales and employment strong.

($1 = 1.4968 Australian dollars)