Australian retail sales increased 6.3% in January compared to the same time last year, according to the latest Mastercard SpendingPulse™, which measures in-store and online retail sales across all forms of payment.
Most retail categories maintained reasonable momentum after a record holiday spend. Lodging recorded the biggest increase in trade in January, up 15.9% compared to 12 months prior, closely followed by apparel (up 14.4%).
Restaurants (up 8.8%), jewellery (up 8.4%) and grocery (up 6.3%) also recorded solid growth.
Electronics (down 3.2%) and home furnishings (up 0.9%) slowed after strong growth during the pandemic and have been the first categories to soften in retail spending.
Australian Retailers Association CEO Paul Zahra said the results whilst positive overall, also reflect the growing impact of price inflation in some categories (grocery) and a slowing down of high spending in some covid impacted categories (home) in previous years.
"These are solid results in a challenging economic environment where we are seeing consumers becoming more value orientated, taking advantage of the Boxing Day sales.
"We also saw many Australians celebrating their freedom over the holidays ahead of the cost-of-living pressures biting.
"We're aware that it is becoming a challenging environment for businesses, particularly small businesses on tighter margins, as they continue to battle rising operating costs associated with increasing cost of debt, fuel, energy, labour, supply chains and rent."
"Further interest rate hikes will have repercussions for both consumers and the retail industry.
"Traders have had a greater capacity to absorb these rate increases while spending has remained robust, but when spending slows - it will take a hefty toll on retailers, particularly small-scale mum-and-dad businesses.
Mr Zahra reiterated that the retail industry is a barometer of the wider Australian economy.
"As a $400 billion sector that employs one in ten Australians, retail is vital in holding the economy together," Mr Zahra said.
