Australia has posted its eighth consecutive rise in retail spending, and economists expect the sector to keep strengthening to pre-global financial crisis levels.
Retail trade rose 0.5 per cent in December, seasonally adjusted, and was up 0.9 per cent in the December quarter, Australian Bureau of Statistics figures show.
AMP chief economist Shane Oliver expects consumer spending to start making a much larger contribution to economic growth than it has over the past few years.
“Retail sales growth looks to be breaking out of the malaise that it’s been in over the last four years that saw annual growth average just 2.7 per cent,” he said.
“This likely reflects a combination of improved household finances on the back of low interest rates, rising wealth levels and improved consumer confidence. This is great news for retailers after a really tough period.
“We expect these factors to support continued strength in retail sales this year, but probably averaging around 4.5 per cent per annum as a return to pre-GFC strength is unlikely as the labour market remains soft.”
Groceries had the strongest rise in the month up 2.5 per cent, followed by at 0.5 per cent gain in spending in cafe and restaurants and department store sales had a 0.3 per cent rise.
Australian National Retailers Association chief executive Margy Osmond said 2013 was the best year for retailers in five years.
“It really was a Christmas to eat, drink and be merry with food retailing rising,” she said.
“Retailers are encouraged by today’s result and it has put the sector in good stead to record a similar result (or better) in the year ahead.
“Most states are now tracking at around six to seven per cent year-on-year growth in turnover which is a positive sign for the sectors ongoing success in 2014.”
St George economist Janu Chan said rising household wealth from higher share markets and house prices are also giving consumers more confidence.
“The data gives us greater confidence that the Australian economy will pick up later this year and leaves us comfortable with our view that the RBA will leave rates on hold for an extended period,” she said.
“We, however, expect a moderate contribution to growth from consumer spending in the December quarter after a soft result in the September quarter.
“Prices rose by a solid 1.1 per cent in the December quarter, which was in line with the strong CPI (consumer price index) data for the December quarter.”