Retail sales rose 1.6 percent in March to a record A$33.6 billion (US$23.9 billion), beating forecasts of 0.6 percent.
Australian retail sales in March slightly beat forecasts for a third straight month as spending built momentum that should help weather this week’s rise in interest rates.
Data from the Australian Bureau of Statistics on Wednesday showed retail sales rose 1.6 percent to a record A$33.6 billion ($23.9 billion) in March, beating forecasts of 0.6 percent have clearly surpassed.
That followed strong gains in January and February, pushing sales up a stellar 9.4 percent year-on-year. Some of that spending would have been offset by rising inflation, but it still points to a positive quarter for economic growth.
“Even allowing for a sharp rise in retail prices, we estimate volumes are up a solid 1.5% qoq,” said Marcel Thieliant, senior economist at Capital Economics.
“While falling consumer confidence poses downside risks amid rising inflation and interest rates, we believe the still high savings rate will allow for further solid spending increases in the coming quarters.”
This resilience reflects the Reserve Bank of Australia’s (RBA) confidence that its first rate hike in a decade will not suddenly plunge the economy into recession.
The central bank hiked interest rates 25 basis points to 0.35 percent on Tuesday and announced more as it aims to curb inflation.
household debt
Australia’s big four banks have all increased their variable mortgage rates by 25 basis points, a drag on households holding A$2 trillion in mortgage debt.
This increase will add A$80 to the average mortgage’s $600,000 in monthly payments and the pain will multiply as markets bet for an increase each month leading up to Christmas.
Futures suggest the RBA could rise to 0.75 percent in June and hit 2.75 percent by the end of the year.
RBA Governor Philip Lowe on Tuesday suggested that 2.5 percent was a “more normal” interest rate level, but was non-committal on when or if that could be achieved.
On a positive note for spending power, households have accumulated an additional $272 billion in savings during the pandemic and have record $1.26 trillion in deposits.
When it comes to their mortgages, too, many are way ahead of the curve with around 21 months of prepayment for the median loan for owner-occupiers.
Demand for mortgages has been strong and new lending rose 1.6 percent to AUD 33.6 billion in March, when analysts had expected a 1.0 percent decline.
Lending for home investment hit a record high this month as the market remained strong, at least outside of Sydney and Melbourne where prices were finally starting to cool.
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