Record dollar spend
Retail sales defied expectations in rising by 1.3 per cent in July, to a record dollar high of $34.7 billion, seasonally adjusted.
Data king James Foster with the charts:
This result appears to stand in stark contrast to other indicators, such as consumer sentiment, for example.
There are a couple of factors to take into account.
Firstly, part of the increase is due to price increases, of course, rather than retail volumes.
And secondly, there was a blistering increases in the number of overseas arrivals in July (with a provisional estimate of 1.083 million arrivals, up from 730,000 in June).
Thus while there was an increase in department store spend and eating out, household goods retail recorded a third decline in four months.
Source: ABS
A stitch in time
Overall, at first blush this was a surprisingly strong headline result, but there's plenty of evidence around in various surveys that retail spend will moderate in the months ahead.
In the current inflationary environment central banks will likely want to act sooner and more aggressively, erring on the side of hawkishness.
Thus despite many other indicators being in a weakening trend - and taking into account the lag effect from the rate hikes already delivered - the balance of probabilities suggests that next month's interest rate hike will be greater than 25 basis points (i.e. 40 or 50).
