Retail sales have risen strongly for a second straight month, as Australians head to the shops with increasing confidence.
Retail trade rose 1.3 per cent in February, well above market expectations of an 0.3 per cent increase.
The February result came on top of a 1.2 per cent rise the previous month, the Australian Bureau of Statistics found.
JP Morgan chief economist Stephen Walters said the back-to-back increases of more than one per cent should help allay some concerns the Reserve Bank of Australia had about subdued consumer spending in late 2012.
“It is one of the things I suppose the RBA was a little puzzled by, the weakness in consumer spending over the second half of last year when we had three falls in a row,” he said.
“Now that has clearly been reversed and very strongly so.”
Spending in all categories rose by more than one per cent, with household goods, department stores and other retailing up by 1.6 per cent.
“It’s not like there is a one-off payment stimulating housing related spending or food,” Mr Walters said.
“It is actually across the board which makes it look very solid.”
RBC Capital Markets economist Michael Turner said the retail figures showed low interest rate cuts were providing a boost to the economy.
He said stronger retail figures meant it was less likely the RBA would cut the cash rate again.
“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 RBA cut the cash rate 1.25 percentage points to three per cent during 2012 but has held it steady so far in 2013.
Australian Retailers Association (ARA) Executive Director Russell Zimmerman said the rise was a good sign for retailers but the sector still faced significant challenges.
“The minimal rise in retail sales figures emphasises further the ARA’s stand that the Fair Work Commission hand down a realistic and manageable minimum wage increase of no more than $5.80 for the retail sector,” he said in a statement.
Most small to medium-sized retailers relied on a minimum wage workforce and any move to increase wages in a time of low consumer confidence and low to negative growth would only lead to further job losses, Mr Zimmerman said.
Referring to retailers losing out as people made purchases online from overseas, he said continuing delays in reducing the low value import threshold from the current $1000 limit was also hurting retail jobs.
Mr Zimmerman said recent political instability was sapping consumer confidence and it was crucial for the Reserve Bank to reduce interest rates to 2.5 per cent.
“Political stability can only be achieved through a majority government and the September election can’t come soon enough,” he said.
Australian National Retail Association CEO Margy Osmond put the increase down to February’s warm weather, contributing to extra spending on fashion, electrical goods and books.
Increased house prices and interest rate cuts in late 2012 also played a role, she said, with households feeling a little more confident about discretionary spend.
But Ms Osmond warned it was too early to herald the start of a broad-based recovery for the retail sector.
“These figures actually represent the best beginning of a year that we’ve seen since 2001,” she told reporters in Sydney.
“But 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.”
Ms Osmond warned that overseas online retailers remain a significant threat to their Australian counterparts and said consumer spending traditionally slows in a federal election year.
