As Shoppers Rein In Spending, Australia’s Retail Sales Level off in February

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Australian retail sales showed a slight reduction in February following a surge of activity over the end-of-year holidays, hinting at consumer caution in the face of rising prices and increasing interest rates.

The latest figures, released by the Australian Bureau of Statistics (ABS), showed that total retail turnover increased by 0.2 per cent across Australia’s states and territories during February seasonally adjusted.

This is a slowing from January’s 1.8 per cent increase but was still encouraging, given that some economists had been expecting a flat or negative outcome for the month.

The February retail sales figures indicate Australians still spend despite recent price increases and interest rates. Sales of goods and services totalled A$35.14 billion ($23.48 billion) during the month, representing a 6.4% year-on-year increase and exceeding median forecasts of a 0.1% rise.

The positive result has benefitted the Australian dollar, trading at $0.6674, up 0.4% for the day on news of the figures. This is likely to relieve consumers who have seen prices rising in many areas due to higher costs for imported goods and wage pressures.

Belinda Allen, an economist at the Commonwealth Bank of Australia, said, “Together with negative real wage growth, this will impact households’ available cash flows.”

Belinda Allen expects that the current trends of low wage growth coupled with higher interest rates will lead to further declines in consumer spending over the coming months.

The Reserve Bank of Australia (RBA) has recently indicated its intention to keep interest rates steady. However, there are growing concerns about a further rate hike later this year, which could further deter consumer spending.

Analysts expect that the RBA will hike rates once more before pausing. However, some economists are cautiously optimistic that there may be a dramatic pause in April due to weak consumer spending and low wage growth.

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