Retail sales, a closely watched sector by the Reserve Bank of Australia when it comes to determining its rate policies, have risen by 0.3% in January.
The increase in sales was in line with expectations by analysts, and comes on the back of a 0.1% decline in the previous month.
“While the pick-up in retail spending since mid-2024 has been boosted by more discretionary spending, this month’s rise is mostly driven by food-related spending,” said Robert Ewing, the Australian Bureau of Statistics’ head of business statistics.
While food-related spending drove the latest retail results, most non-food industries rose, led by other retailing (+2.4%), clothing, footwear and personal accessory retailing (+2%) and department stores (+0.6%).
This was partly offset by a large fall in household goods retailing (-4.4%). “The fall in household goods follows four straight rises driven by widespread discounting activity around Black Friday and Cyber Monday sales events,” said Ewing.
“Consumers bought furniture and electrical goods in earlier months to take advantage of the large discounts on offer.”
Retail turnover increased in most states and territories. The ABS noted that the only exceptions were New South Wales (-0.3%) and the Northern Territory which remained relatively unchanged.
Retail sales in Australia are closely watched as consumption accounts for more than half of the gross domestic product.
Last week, the ABS published figures which showed that annual headline inflation remained steady at 2.5% in January, but underlying inflation, which is the measure tracked by the RBA when determining rate cuts, increased slightly. Underlying inflation increased 0.1 of a percentage point to 2.8% in January.
While the RBA lowered the official interest rate from 4.35% to 4.1% last month, governor Michele Bullock has warned the market not to expect further successive rapid rate cuts.
RBA minutes from its February meeting released on Tuesday reiterate that. The RBA’s meeting minutes stated that due to “risks surrounding the board’s decision, members agreed that their decision at this meeting did not commit them to further reductions in the cash rate target at subsequent meetings.”
“They emphasised that the decision at this meeting acknowledged the progress that had been made in reducing inflation while not committing the board to ease policy further,” the minutes noted.
Another metric which directly affects retail sales, especially imports as well as inflation, is the performance of the Australian dollar. On Tuesday morning, the Aussie dollar already dropped by around 0.3% to around US62.20c as the US announced it was going ahead with tariffs on Mexico and Canada, with potentially further tariffs in the pipeline for China too.
