Investing.com-- Australian retail sales grew at a slightly better-than-expected pace in March amid steady spending on food, although the rising cost of living and weak economic conditions saw sales remain at near six-month lows.
Retail sales grew 0.4% in March from the prior month, slightly more than estimates for a rise of 0.3% and the prior month’s reading of 0.2%, data from the Australian Bureau of Statistics showed on Wednesday.
But total retail turnover for the month was A$35.31 billion (A$1 = $0.6671), remaining at levels last seen in September.
Food-related spending was the biggest contributor to the monthly increase in turnover, with increased spending on both eating out and takeaway services. But this was also largely driven by increased food inflation.
“Businesses in cafes, restaurants and takeaway food services are passing on their rising costs to consumers through price rises, while also benefiting from strong demand driven by the continued return of large-scale cultural and sporting events,” Ben Dorber, ABS head of retail statistics, said in a note.
Spending on most other consumer discretionary items continued to trend lower, amid continued pressure from high inflation and rising interest rates. While recent data showed that inflation had eased from an over 30-year peak, it was still relatively high, at around 7% in the first quarter of 2023.
“Spending on non-food retailing has slowed in response to interest rate rises and increased cost of living pressures,” Dorber said.
The Reserve Bank of Australia unexpectedly hiked interest rates to a near 11-year high this week, as the bank moves to curb high inflation. But the rate hikes have also factored into a higher cost of living over the past year, given that they push up mortgage rates and housing costs.
Further cooling in retail sales is likely this year as economic activity slows. The RBA also warned that economic growth is likely to trend well below average in 2023 and 2024.
The Australian dollar rose 0.2% after Wednesday’s reading, extending gains from Tuesday after the RBA’s surprise rate hike.