The Australian economy may have turned a corner as increasingly confident consumers take the money they’ve saved through lower interest rates and head for the shops.
Retail spending surged 2.5 per cent during January and February – a stronger growth rate than the sector recorded during the whole of 2012.
It was also the strongest growth recorded for the first two months of the year in more than a decade.
According to Australian Bureau of Statistics figures, spending rose 1.3 per cent in February, with all sub-sectors benefiting as consumers opened their wallets.
Department stores and household good retailers performed best, both recording a 1.6 per cent rise in spending.
HSBC Australia chief economist Paul Bloxham said the figures reflected an improvement in household wealth since the start of the year.
Since the Reserve Bank of Australia cut the cash rate to three per cent in December, equal to its lowest level ever, both house prices and the share market have recorded strong growth.
With more money in their pockets, consumers were feeling more confident about spending, Mr Bloxham said.
But he said the stronger economic conditions mean further rate cuts were unlikely and a rate hike is possible by the end of 2013.
“It gives us more reasons to think the soft patch in the Australian economy is behind us and gives us more reasons to think that the RBA won’t need to cut interest rates further,” he said.
RBC Capital Markets economist Michael Turner agreed further rate cuts were looking unlikely, unless conditions in the global economy deteriorated.
“Based on the domestic data it suggests that the RBA will be more reluctant to exercise the easing bias they still held onto in the April board meeting,” he said.
The strong retail figures appear to be backed up by separate figures showing a 3.1 per cent rise in home building approvals during February.
But Mr Turner said the figures were skewed by a rise in approvals for public sector houses during the month, with only moderate growth recorded in the key private sector homes sub-sector.
“There is modest improvement there and that is probably going to be the case for the rest of the year,” he said.
Meanwhile, retail experts warned the sales growth during January and February may not be repeated as 2013 rolls on.
Australian National Retail Association chief executive Margy Osmond said it was too early to say the sector was in recovery mode after a difficult couple of years.
“It doesn’t alter the fact we need a good couple of months more before we can legitimately open the champagne and start saying times are better for retail,” she said.
Ms Osmond said February’s warm weather would have contributed to the sharp rise in sales, boosting spending on fashion, electrical goods and books.
