SYDNEY (BLOOMBERG) - Australian retailers recorded a fourth consecutive month of sales gains, suggesting cashed-up households are so far weathering a spike in the cost of living from surging fuel and other prices.
Sales advanced 0.9 per cent in April to a fresh record of A$33.9 billion ($33.2 billion), just shy of economists' estimates for a 1 per cent increase, Australian Bureau of Statistics (ABS) data showed on Friday (May 27). In response, the Australian dollar rose and was trading at 71.35 US cents at 12.50pm in Sydney (10.50am Singapore time).
"Cost pressures from retailers have been passed on to consumers but so far, that is not having any meaningful impact on consumer spending patterns," said Mr Callam Pickering, an economist at global jobs website Indeed, who previously worked at the central bank. The spending is "certainly a positive early development" for second-quarter economic growth, he said.
Retail spending surpassed A$100 billion over the past three months, compared with roughly A$80 billion prior to the pandemic, Mr Pickering said, reflecting fiscal and monetary stimulus that buttressed household balance sheets.
The data also highlight underlying momentum in the A$2.2 trillion economy and a degree of resilience among consumers, who are grappling with surging inflation, rising interest rates and a cooling property market.
In a sign of the strong economy-wide inflationary impulse, ABS data on Thursday showed more than a third of firms surveyed plan to raise the price of their goods or services by more than usual over the next three months.
The Reserve Bank of Australia raised interest rates by 25 basis points to 0.35 per cent earlier this month and signalled further hikes to come. Money markets are pricing in a rate of 2.7 per cent by year end, while economists are less hawkish and see it below 2 per cent.
That raises questions over the sustainability of the strong run in household spending, particularly with consumer sentiment declining. Private consumption accounts for almost 60 per cent of annual economic output.
"There is a growing gap between consumer sentiment readings and consumer spending readings," said Ms Belinda Allen, a senior economist at Commonwealth Bank of Australia. "Sentiment readings are around 20 per cent lower than a year ago levels, while retail trade is around 10 per cent higher."
