Wayne Cole

SYDNEY, (Reuters) – Australian retail sales surprised everyone in January. The surge in Omicron cases was weathered with grace by shoppers. This suggests that the economy has maintained a lot of momentum for the coming year.

On Monday, data from the Australian Bureau of Statistics showed that retail sales increased 1.8% to A$32.5Billion ($23.3B), which is second in record. It easily beats forecasts of a 0.4% increase.

This was following a December drop of 4.4%, which was affected by online sales’ popularity that had dragged spending to November.

Banks report weekly data on card spending. This shows that activity has been quickly reactivated after coronavirus cases started to decline in January. It is currently running at a level well above what it was a year ago.

“With new virus cases now only a quarter of their mid-January peak, AppleMaps routing requests are now well above their 2020 levels and the number of visitors at retail & recreation facilities has rebounded, too,” said Marcel Thieliant, a senior economist at Capital Economics.

The Russian invasion in Ukraine, and subsequent spikes in commodity prices have added uncertainty to the outlook. However, the effect on Australia so far has been minimal.

Gareth Aird from CBA, the head of Australian economics said that Australia’s trade relationship with Russia is “negligent”. We expect that the economy will be protected if the U.S. and major European military power do not attack Russia in Ukraine.

Higher petrol prices can act as a tax for consumers while increasing inflationary pressure. This could make it more difficult to implement policy at the Reserve Bank of Australia.

The central bank said that a rate increase could be made later in the year, if the economy improves. However, markets have already priced in an increase to 0.255% by July.

Tuesday’s March policy meeting at the central bank is scheduled. Rates are expected to remain stable at 0.1%.[AU/INT]

Markets are eager to observe how it reacts to sudden geopolitical uncertainty, and recently released data that showed wages had only modestly increased in the fourth quarter last year.

On Monday, other data showed that homeowners continued to borrow heavily and mortgage credit was running at an annual speed of 7.7%. This is despite the booming housing market.

The December quarter GDP figures are due Wednesday. These numbers are likely to reflect economic recovery of strong 3%, a result of an ease in coronavirus lockdowns. Consumer spending has been sluggish.

($1 = 1.3924 Australian dollars)