FILE PHOTO - A shopper holds items and looks at others on sale at a clothing retail store in central Sydney, Australia
FILE PHOTO - A shopper holds items and looks at others on sale at a clothing retail store in central Sydney, Australia, March 19, 2017. Reuters

Australian retail sales rebounded in January after a surprise plunge in December that owed much to changing spending habits, though the underlining pulse was facing headwinds from high inflation and rising interest rates.

Data from the Australian Bureau of Statistics (ABS) on Tuesday showed retail sales rose 1.9% in January from December, when they dived 4.0%. Sales of A$35.1 billion ($23.67 billion)were 7.5% higher than a year earlier.

That topped median forecasts of a rise of 1.5%, but showed little growth over the three months from November.

"Looking through this volatility shows that turnover is at a similar level to September 2022, and on average, growth has been flat over the past few months," said Ben Dorber, ABS head of retail statistics.

Still, data for spending on bank cards also suggests consumers have been splashing out on services, particularly travel, rather than on the goods covered by the retail report.

The overall resilience of consumer demand is a major reason analysts forecast the economy as a whole grew by a solid 0.7% in the December quarter, and 2.7% for the year.

Figures for gross domestic product (GDP) are due on Wednesday and should show a sizeable contribution from international trade as resource exports boomed.

ABS data on Australia's current account showed the surplus widened sharply to A$14.1 billion in the fourth quarter, while net exports added 1.1 percentage points to GDP.

High prices saw exports of mining commodities top A$400 billion for the first time in 2022.

Government spending also added 0.1 percentage points to GDP growth, while drags are seen coming from inventories, housing and consumer spending on goods.

"It's clear that high inflation and rising interest rates are weighing on consumer spending," said Sean Langcake, head of macroeconomic forecasting for BIS Oxford Economics.

"With spending still rebalancing toward services and weaker fundamentals for consumption growth, we expect retail sales growth will be quite patchy over 2023."

The Reserve Bank of Australia (RBA) has already lifted rates by 325 basis points to a decade-peak of 3.35%, and markets are wagering on further hikes toward 4.35%.

The central bank expects the economy to grow a sub-par 1.4% this year and 1.6% next, a slowdown that will hopefully bring demand back in line with supply and help curb inflation.

($1 = 1.4830 Australian dollars)