Retail sales surge in February – but how much is inflation?

(Source: Bigstock)

Retail spending rose 6.4 per cent year on year in February levelling out after a period of increased volatility, according to data from the Australian Bureau of Statistics (ABS).

Month on month, turnover rose 0.2 per cent as shoppers spent more than $35 billion in stores and online.

Spending in food-related industries grew steadily in February however non-food industry sectors yielded a mixed result as consumers refrained from making “discretionary” spending. 

Cafes, restaurants and takeaway services were up 17.1 per cent followed by food sales at 7.9 per cent, department stores at 7.7 per cent and clothing, footwear and accessories at 6.2 per cent. 

Other retail spending grew by 3.2 per cent while sales of household goods fell by 2.3 per cent.

Australian Retailers Association (ARA) CEO Paul Zahra said spending growth over the past few months has “gradually softened”.

“We’re certainly seeing the start of the spending slowdown as a result of the cost-of-living pinch gripping Australians, with household goods being the first discretionary category to continue to see a reduction in spend.”

He added that inflationary price increases are mostly driving retail spending growth.

By state, the ACT led with the highest growth in retail turnover at 9.2 per cent followed by WA at 8.7 per cent, Tasmania and SA at 7.1 per cent, Queensland at 6.6 per cent and Victoria at 6.1 per cent.

CreditorWatch’s chief economist, Anneke Thompson, said the latest data should give the Reserve Bank of Australia (RBA) board “a discussion point” in support of a “pause to monetary policy tightening” in April.

“While we are yet to see a marked downturn in spending at cafes and restaurants, the upcoming winter could tell a different story as more Australian borrowers come off fixed-rate loans and many household budgets will see a dramatic fall in excess money available for eating out.”

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