Admittedly, today’s result comes after a weak outcome for the month of January (up just 0.2%, albeit revised up from half that). Still, this is welcome news for what remains the dominant segment of Australia’s GDP jigsaw - consumer spending still accounts for more than half the economy.
The discretionary areas of retailing were the strongest in February. Sales at department stores, and those of household goods, clothing and footwear, all rose more than 1% over the month. Combined, the rise in the discretionary areas of spending was the biggest since last November, when technology sales were inflated by the release of the new iPhone. Without that fleeting technology effect, today’s result is the best since last May.
All of the non-discretionary areas of retail spending also rose in February, although food sales, the largest category, expanded just 0.3% over the month. Growth in total retail spending over the year to February bounced back to 3.0%, but this remains well below the long term average. This subdued performance highlights the struggles that many retailers have had in recent times, particularly the so-called “bricks and mortar” providers.
The improvement in consumers’ mood may reflect the fact that Australia generated more than 400,000 additional jobs over the past year, most of them full time. But, wages growth is marooned close to all-time lows, interest rates have started to rise, share markets have been volatile, after an unusually calm 2017, and consumer confidence remains brittle. So, the retail sector probably is not out of the woods just yet.