By Ambar Warrick
Investing.com -- Australian retail sales grew at a slightly bigger-than-expected pace in February as they stabilized after three months of seasonal volatility, although high inflation and interest rates saw consumers stay wary of spending big.
Retail sales grew 0.2% in February from the prior month, data from the Australian Bureau of Statistics (ABS) showed. The reading was greater than expectations for a rise of 0.1%, but well below January’s rise of 1.9%.
Spending on food-related industries was the biggest contributor to the rise, up 0.2% to its highest level in three years.
But this only slightly offset weak spending on household goods, which remained close to its lowest level in about 18 months. Spending on clothing and department store sales also saw modest rises.
Retail sales saw large swings over the past three months, falling sharply towards the end of 2022 before rebounding in January. But consumer spending has come under increased pressure from rising inflation and worsening sentiment towards the economy.
“Retail sales rose modestly in February and appear to have leveled out after a period of increased volatility over November, December and January,” said Ben Dorber, ABS head of retail statistics.
While Australian inflation appeared to have peaked, it was still close to its highest level in 30 years in February, offering little relief to consumers.
Rising interest rates also factored into higher rents and mortgage payments, translating to increased housing costs.
This saw Australian consumer sentiment sour sharply this month, sticking to levels last seen during the 2020 COVID-19 pandemic. The country is now facing a potential slowdown in economic growth, given that retail spending is a key driver of the GDP.
Still, strength in the jobs market also somewhat helped keep retail sales in expansion territory, albeit slightly. Employment is also expected to cool this year as the Reserve Bank continues tightening monetary policy.