Retail trade grew at twice market expectations in January as an improving jobs market and new year sales enticed consumers back to the shops, economists say.
The rise in consumer spending added to the case for a rate rise by the Reserve Bank of Australia (RBA) on Tuesday, they said.
Retail trade rose 1.2 per cent in January to a seasonally adjusted $20.145 billion, the Australian Bureau of Statistics said on Tuesday.
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Market economists had expected an increase of 0.5 per cent.
The rise in January followed a 0.9 per cent fall in December and a 1.5 per cent increase in November.
"Strength in the month was concentrated in department stores (up 7.2 per cent) and clothing (up 2.9 per cent), but in both cases this followed falls in December suggesting strength may reflect strong post-Christmas sales related spending," Westpac Economics said in a statement.
"Spending on household goods remains surprisingly soft, up just 0.6 per cent in January after a 0.6 per cent dip in December."
Turnover in both department stores and clothing declined in December.
National Australia Bank senior economist David de Garis said a recovery in the jobs market had underpinned consumer sentiment.
Australia's unemployment rate fell 0.2 percentage points to a 11-month low of 5.3 per cent in January, ABS data showed last month.
"It gives the impression the improving labour market is supporting consumer spending in the first part of this year," Mr de Garis said.
RBC Capital Markets senior economist Su-Lin Ong said the data added to the improvement in domestic indicators in recent months.
"If the RBA is waiting for more information as to how the tightening to date is impacting the economy and how it will fare as fiscal stimulus is withdrawn, today's numbers hint at a consumer that appears little affected by higher borrowing costs and is spending up without any fiscal assistance," Ms Ong said.
The central bank lifted the cash rate by 25 basis points to 4.0 per cent on Tuesday after its monthly board meeting. This followed
increases of a similar amount each in October, November and December last year.
JP Morgan economist Helen Kevans said the retail sector would be "patchy" for the near term as consumers adjusted to recent and future rises to interest rates.
"Not only will interest rates continue to rise (we forecast cash rate of five per cent by year-end), but recent increases in petrol prices and recent falls in the local equity market will curb spending in coming months," Ms Kevans said.
Retail turnover did not fall in any state during January, with South Australia experiencing the strongest rise, up 3.7 per cent, followed by Western Australia, up 2.6 per cent.
