Retail sales in the nation posted a fifth straight month of gains with a surprise 0.9 per cent rise in May to $34.2 billion versus a consensus of an increase of 0.4 per cent. This indicates that households continue to remain resilient following the Reserve Bank of Australia’s (RBA) two super-sized interest rate hikes.
The strength in consumer spending means that the central bank has the green light to continue its path to tighten monetary policy.
Five of the six retail industries saw a jump in May, which is attributed to higher prices. Department stores added the most, up 5.1 per cent, followed by cafes, restaurants, and takeaway food services, which added 1.8 per cent. Other retailing rose 1.5 per cent, food retailing gained 0.6 per cent and household goods retailing grew by 0.4 per cent.
These results come ahead of the policy meeting next Tuesday 5 July.
The central bank will also review a set of other figures, including inflation. The trimmed mean annual inflation, which excludes large price rises and falls and is the central bank’s preferred inflation gauge, rose to 3.7 per cent, the highest since March 2009, according to the Australian Bureau of Statistics
However, the everyday Australian looks at the headline annual inflation rate at 5.1 per cent as of the March quarter. The central bank expects this to peak at around 7 per cent by the December quarter.
As for how much the RBA will raise interest rates? Last Friday in Switzerland at the UBS panel discussion, governor Philip Lowe said that rate hikes will be conducted in 25 or 50 basis point increments.
The Australian dollar against the greenback rose after the data, before losing steam to trade at 69.13 US cents at 11.51am AEST. Benchmark three-year bond yields climbed to almost 3.29 per cent from 3.26 per cent, the10-year bond yield rose four basis points to 3.78 per cent.
Sources: ABS, RBA, Bloomberg