By Ambar Warrick
Investing.com-- Australian retail sales rose more than expected in August, data showed on Wednesday, as strength in the job market and elevated inflation spurred steady spending by consumers.
Data from the Australian Bureau of Statistics showed retail sales rose 0.6% in August from July to a record high A$34.88 billion ($22.39 billion), more than expectations for growth of 0.4%. The reading marked the eighth consecutive month of growth for retail sales, although the pace of growth slowed from the 1.3% rise seen in July.
Spending on the food industry continued to be the biggest driver of retail growth, with cafes, restaurants and takeaway food services rising 1.3% from the prior month. Non-food industry spending was mixed, with clothing, footwear and personal accessory retailing logging its biggest fall this year, down 2.3% in August.
Strength in Australia’s job market appeared to be the biggest driver of spending, given that unemployment is at a near 50-year low in the country. But rising inflation and weakness in wage growth meant that consumers held off from making big purchases.
Rising inflation also likely factored into the higher sales, given that consumer prices are running at their highest levels in 20 years. The Reserve Bank of Australia has hiked interest rates several times this year, and has signaled that it will keep doing so.
Rising interest rates and inflation may act as headwinds to consumer spending later in the year, as consumer sentiment was also dented by the two factors.
Still, steady spending saw Australia’s economy maintain its strong momentum in the second quarter, giving the Reserve Bank enough headroom to keep raising rates.
The Australian dollar showed little reaction to the positive data, falling 0.3%. Headwinds from rising U.S. interest rates pushed the currency to a two-year low against the dollar this year.