(Bloomberg) -- Australian retail sales moderated in February despite Taylor Swift-driven demand, as households remained cautious about their finances with inflation still elevated and interest rates at a 12-year high.

Sales rose 0.3% from the prior month, falling short of an estimated 0.4% gain, Australian Bureau of Statistics data showed Thursday. The outcome follows a 1.1% jump in January helped by major tennis and cricket tournaments. 

The retail report comes a day after data showed Australian inflation was steady in February, when economists had predicted a slight acceleration. The more subdued sales and consumer price growth suggest the Reserve Bank’s tightening cycle is gaining traction among households.

From a year earlier, retail sales climbed 1.6%, running well below the 4-5% pace seen in early 2023 as higher borrowing costs and other cost-of-living pressures weigh on household spending.

“Looking past the temporary and one-off impact of the Taylor Swift concerts, underlying growth in retail turnover was up only 0.1% in trend terms,” said Ben Dorber, ABS head of retail statistics. “After a period of higher volatility from November through to January, underlying spending has stagnated.” 

Retail sales can be an important consideration in policy decisions given consumption accounts for more than half of gross domestic product. The RBA has repeatedly highlighted the outlook for domestic consumption remains a key uncertainty.

So far, broader economic data has generally moved in-line with the RBA’s forecasts — GDP growth has eased, inflation is moderating, retail sales are slowing and unemployment remains low. Earlier this week, a survey showed Australia’s consumer sentiment fell in March to remain in “deeply pessimistic” territory.

A separate ABS report on Thursday showed job vacancies dropped 6.1% between November and February.

“Job vacancies are now 23.5% lower than they were at their peak in May 2022,” said Bjorn Jarvis, ABS head of labor statistics. May 2022 was when the RBA began its tightening cycle.

The RBA next meets on May 6-7 when it’s likely to again leave its key rate at 4.35%. Governor Michele Bullock signaled last week that the monetary tightening cycle has all but ended, though she didn’t provide any indication on when rate cuts might begin. 

Economists and money markets predict the RBA will embark on an easing cycle in the second half of the year.

Thursday’s retail data also showed:

  • Clothing, footwear and personal accessories, up 4.2%, and department stores, 2.3% higher, posted the largest gains. “Fashion and accessory retailers told us offerings of Taylor Swift inspired outfits and related do-it-yourself accessories added to turnover in February,” Dorber said
  • Cafes, restaurants and takeaway food services, 0.5% higher, had a more modest rise this month with an increase in spending also linked to the Taylor Swift concerts. This followed a 1.4% increase in January, which was boosted by large sporting events

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