Australia’s retail sector recorded modest growth in May, with total spending rising 3.3% year-on-year to $37.3 billion, according to new figures from the Australian Bureau of Statistics (ABS).

The data shows that all major retail categories saw year-on-year increases, led by a 4.78% jump in the “other retailing” category which includes cosmetics, sporting and recreational goods, and a 3.83% rise in spending at cafes, restaurants, and takeaway outlets.

Department stores (3.71%), clothing and accessories (3.5%), household goods (2.81%) and food (2.58%) also posted gains.

Despite the improvement over May last year, the Australian Retailers Association (ARA) has flagged ongoing concerns about the sector’s broader health.

ARA CEO Chris Rodwell said that while any growth is welcome, the current figures reflect only a modest rebound and not a true recovery: “May growth is slightly lower than in recent months, and while it’s tracking above last year’s levels, consumer confidence remains soft.”

“We are still far from a retail recovery,” Rodwell added. “That’s why next week’s RBA interest rate decision is critical. A rate cut could help stimulate consumer spending in the second half of the year.”

He also highlighted mounting cost pressures facing retailers, from rising wages and insurance premiums to increasing energy costs and complex regulatory demands.

“Retailers are still in survival mode. Governments need to act on productivity reforms and reduce compliance burdens so retailers can focus on growth,” Rodwell added.

“Retail is a key driver of the Australian economy – employing one in ten Australians. A strong retail sector is essential for a broader economic recovery.”

Western Australia led state-based growth in May with a 5.62% year-on-year increase in retail turnover, followed by Queensland (4.13%) and Victoria (3.95%). New South Wales saw a more subdued rise of 1.51%, while Tasmania (1.78%) and the ACT (1.0%) recorded the smallest gains.