Cheaper petrol has given Australians more cash to splash and economists say the tills could keep ringing as interest rates head lower.
Retail spending rose 0.4 per cent to $23.9 billion in January, double the growth rate witnessed in December.
The rise was driven by sharp falls in the price of petrol from late 2014, which put more cash in consumers' pockets and allowed them to spend it elsewhere, economists said.
January was the eighth straight month of growth, but annual growth slipped to a below-average 3.6 per cent, CommSec economist Savanth Sebastian said.
"Activity is OK without being great," he said.
The housing construction boom and rising home prices were supporting the retail sector, Mr Sebastian said, and February's surprise interest rate cut will also lend a hand.
"The key shift in household psychology is that rate hikes are clearly off the agenda over the coming year - and that should support spending," he said.
January's spending figures show a fall in food sales at supermarkets were offset by stronger sales in department stores and restaurants and cafes.
Excluding food, retail sales were actually up about one per cent, JP Morgan economist Tom Kennedy said.
"That supports the idea that consumption should be quite strong in the first and second quarters of this year due to lower oil prices," he said.
Executive director of the Australian Retailers Association Russell Zimmerman said department store sales were boosted by heavy discounting.
Restaurant and cafe sales were likely boosted by people eating out instead of at home, which in turn weighed on general food sales, he said.
"People are on holidays in January so they're either away on holidays, or they're eating out trying to give mum a break, or making arrangements to go out and meet friends," he said.
Despite cheaper petrol and lower interest rates, Mr Zimmerman said sales growth could slow in February.
"People have been on leave, they've had Christmas and all of a sudden in February the bills start rolling in, so people start to naturally slow down their spending," he said.
"The sales are over and you've got neither summer nor winter - winter stock is only just starting to arrive and it's still too hot to sell it.
"I'm hearing around the retail industry that February has been a bit slower."
HOW AUSSIES SHOPPED IN JANUARY
* Department store sales up 2.2 pct
* Cafes, restaurants, takeaway food up 2.0 pct
* Other retailing up 1.0 pct
* Household goods up 0.7 pct
* Clothing, footwear, personal accessories down 0.1 pct
* Food down 0.7 pct
Source: ABS, seasonally adjusted data
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