SYDNEY (Reuters) – Australian retail sales saw a modest increase in January, continuing the positive momentum from the previous quarter as consumer spending remained robust amid easing inflation and significant tax cuts.
According to data from the Australian Bureau of Statistics (ABS), retail sales rose by 0.3% in January, following a 0.1% decline in December, in line with analysts’ expectations. On a year-on-year basis, sales were up 3.8%, reaching A$37.1 billion ($23.1 billion). This growth was primarily driven by increased food-related spending, with discretionary items seeing less of a boost.
Robert Ewing, head of business statistics at the ABS, attributed the surge to strong demand in the catering sector, driven by large-scale events such as record attendance at the Australian Open and various cricket matches. “Bumper crowds across large-scale events lifted spending in catering services,” Ewing said.
The retail sector’s positive performance is also supported by broader economic factors, including the Reserve Bank of Australia’s (RBA) recent interest rate cut, which reduced mortgage payments and boosted consumer confidence. Additionally, lower inflation and significant cuts to income taxes have helped maintain steady consumer spending.
However, while the RBA has noted the recent rebound in consumption, it remains cautious about whether the recovery is sustainable. The central bank attributes some of the retail uptick to end-of-year discounting, and highlighted a 4.4% decline in household goods spending for January, following a period of growth.
The RBA’s recent interest rate cut to 4.1% has kept the outlook for further easing uncertain. Despite the rebound in consumer spending, the ongoing strength of the labor market has lessened the likelihood of another rate cut in the immediate future. Markets are currently pricing in a modest chance of a rate cut at the RBA’s next meeting on April 1, with a more significant probability of a reduction in May.
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