AUSTRALIAN retail sales were subdued in February, adding to evidence that household spending is beginning to slow in the face of the Reserve Bank of Australia’s (RBA) aggressive interest rate increases.

Sales advanced 0.2 per cent from a month earlier, matching forecasts, Australian Bureau of Statistics (ABS) data showed on Tuesday (Mar 28). The result suggests a levelling-out of spending after a 1.8 per cent surge in January and 3.9 per cent plunge in December.

“On average, retail spending has been flat through the end of 2022 and to begin the new year,” Ben Dorber, ABS head of retail statistics, said in a statement. “Non-food industry results were mixed as consumers continue to pull back on discretionary spending in response to high cost of living pressures.”

The result is a key input for the RBA’s April meeting as the board considers the case for a pause after 10 straight hikes. Monthly inflation data due on Wednesday will be the final major report that policymakers review ahead of next week’s meeting.

The weakness in sales suggests consumers are beginning to hunker down in the face of rising borrowing costs, bolstering the argument for the central bank to stand pat. The RBA has raised rates by 3.5 percentage points since May 2022 and resilient consumers have been a key factor in policymakers’ confidence the economy can withstand higher rates. BLOOMBERG