Retail sales rose by 0.2 per cent in February, according to the Australian Bureau of Statistics (ABS), down from the 1.8 per cent lift seen in January but in line with the consensus forecast.
The February retail trade data is one of the key pieces of information that will inform the Reserve Bank’s next interest rate decision, when the bank will either deliver its 11th consecutive rate hike or leave rates unchanged for the first time in a year.
Speaking to InvestorDaily, AMP chief economist Shane Oliver said that the retail sales figures appeared to support the argument for a pause next month.
“To me, the numbers were on the soft side. They were in line with market expectations, but a 0.2 per cent gain, given the volatility we’ve seen over the last few months, leaves retail sales flat on where they were in September,” he said.
“Since September, retail sales have really just tracked sideways with a lot of volatility. They’re still below their November high. They’re only up 6.4 per cent on a year ago which, in real terms, means that they’ve fallen, given that inflation is above that.”
AMP has forecast that the RBA will pause in April, but Dr Oliver conceded that it is a “close call” given that the central bank remains concerned about inflation but must also consider the extent of rate hikes delivered to date and the increasing signs that the economy is slowing.
Meanwhile, CreditorWatch chief economist Anneke Thompson said that the data showed that consumers appeared to be continuing to reduce their spending on discretionary goods.
“Overall, the increase in spending over the month, at 0.2 per cent, was very subdued and will give the Reserve Bank of Australia board at the very least a discussion point in support of a pause to monetary policy tightening in April,” she said.
Economists at ANZ described the monthly increase in retail sales as “modest” and said that a 25 basis point (bp) rate hike next month remains their central scenario.
“Our ANZ-observed spending data shows a broad-based pullback in spending in March,” said ANZ senior economist Adelaide Timbrell and economist Madeline Dunk.
“We think spending momentum will continue to deteriorate, as household budgets are squeezed by rising rates and inflation.”
However, the economists noted that their forecast would be subject to change if the February monthly consumer price indicator (CPI), another key data release for the RBA, is “very weak”.
The big four bank has forecast an annual increase of 6.8 per cent for the monthly indicator, which is due to be released by the ABS on Wednesday morning.
ABS head of retail statistics Ben Dorber said that retail sales appeared to have levelled out on the back of a period of increased volatility in November, December, and January.
“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.
“Non-food industry results were mixed as consumers continue to pull back on discretionary spending in response to high cost of living pressures.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
