Australian retail sales hit record high in May

Australian retailers enjoyed a fifth month of sales gains in May, suggesting cashed-up households coped well after the first of two interest rate hikes by the central bank.

In May sales were up 0.9%, more than double what economists predicted, to a new record A $34.2 billion $23.6 billion. It adds weight to expectations that policymakers will continue on a path of rapid monetary tightening this year.

According to Callam Pickering, an economist at global jobs website Indeed Inc. who previously worked for the central bank, households have successfully absorbed the impact of rising consumer prices and haven't been spooked by rising mortgage rates. That would give the Reserve Bank some confidence in the economy's ability to withstand these turbulent times. In a statement Wednesday, the Australian Bureau of Statistics said that the sales jump was broad-based across five of the six retail industries and was driven by higher prices. The biggest rise in department stores was the rise, up 5.1%, followed by cafes, restaurants, and takeaway food services.

The Australian dollar went up after the data, before giving up some of the gains to trade at 69.12 US cents at 12: 22 p.m. in Sydney. Benchmark three-year bond yields went from lows to 3.29% on the day.

The figures will provide some comfort to the RBA, but it will be interesting to see how its second, larger hike to 0.85% in June affected consumers. The central bank raised borrowing costs by half a percentage point this month and has signaled further hikes to come, leading money markets to price in a rate of about 3.25% by the end of the year.

Pickering and his counterparts at banks expect the RBA to hike the cash rate aggressively over the rest of the year, including another half-point hike next Tuesday.

Consumer spending, which has so far stayed resilient in the face of surging prices and a cooling property market, is going to take a hit, according to some economists. Private consumption is responsible for almost 60% of Australia's $2.1 trillion annual economic output.

It may take a few months to see the impact of retail data as consumers adjust spending, said Diana Mousina, senior economist at AMP Capital Markets. Retail spending is likely to slow down as consumers struggle with an increase in interest rates and high inflation. None ADT Is Betting On Google Can Drag It Into the Future?