Seasonally adjusted retail trade rose by 0.3 per cent in January 2025 and 3.8 per cent compared to the year prior, according to data from the Australian Bureau of Statistics.

The rise was largely driven by a bounce-back in spending on food, with spending on dining out rising by 1.1 per cent and retail food by 0.7 per cent.

Robert Ewing, head of business statistics for the ABS, said: “While the pick-up in retail spending since mid-2024 has been boosted by more discretionary spending, this month’s rise is mostly driven by food-related spending.”

“Bumper crowds across large-scale events, including record attendance at the Australian Tennis Open and cricket events, lifted spending in catering services.”

While the figures were promising for a recovery in consumer spending, according to Harry Ottley, Commonwealth Bank economist, the strength of the consumer environment at the end of last year may have been overstated due to discounting activities.

“The upshot in our view is that while the consumer environment has clearly improved, heavy discounting may have overstated the level of strength. The spending data in coming months will be key,” Ottley wrote in an update for the bank.

Growth is also coming from a weak base. The average annual growth trend for retail trade is currently 4.1 per cent, below the 4.7 per cent average from 2000 to 2019.

Most non-food industries also rose across January, led by other retailing (2.4 per cent), clothing (2 per cent) and department stores (0.6 per cent). This was slightly offset by a 4.4 per cent fall in household goods retailing after widespread discounting activity towards the end of 2024.

“The fall in household goods follows four straight rises driven by widespread discounting activity around Black Friday and Cyber Monday sales events,” Ewing said.

“Consumers bought furniture and electrical goods in earlier months to take advantage of the large discounts on offer.”

By industry subgroup, household goods spending in January fell 8.2 per cent for electrical and electronic goods, fell 4.9 per cent for furniture, floor coverings, houseware and textile goods, and rose 0.2 per cent for hardware, building and garden supplies.

January’s retail turnover growth of 0.3 per cent follows a fall of 0.1 per cent in December 2024 and rise of 0.7 per cent in November.

Minutes from the RBA’s February monetary policy meeting indicated that there was still a degree of uncertainty regarding future consumption growth.

The possibility that consumption growth could pick up more quickly than expected would provide the Reserve Bank with more incentives to hold the cash rate. Conversely, the risk that consumption growth may fail to recover made the case for a cut.

“The recovery in consumption was also not yet assured, given uncertainty about how much the December quarter data had been influenced by discounting or promotional activity and the risk that earlier falls in real household disposable income would exert a persistent drag,” the RBA said in its February meeting minutes.