Australian retailers recorded their strongest January sales growth in six years as increasingly confident consumers headed back to the shops.
Retail spending rose 0.9 per cent, seasonally adjusted, in January, reversing three months of decline in the sector, the Australian Bureau of Statistics found.
The figures showed strong rises in the household goods sector, with spending up 1.3 per cent, and cafes, restaurants and takeaways, up one per cent.
The strongest growth occurred in the sector designated as "other" by the ABS - which includes businesses like newsagents, florists and bookshops - with spending up 2.6 per cent.
CommSec economist, Savanth Sebastian, said it was the fastest January spending growth since 2007, before the onset of the global financial crisis.
He attributed the surprise sales surge to lower interest rates and improved consumer confidence.
"Share markets have rallied, super is looking better, house prices are looking solid and those drivers are enticing consumers to part with some hard-earned cash," he said after the figures were released on Tuesday.
Sebastian said there were signs consumer confidence had continued to improve since January, which suggested retail spending had turned a corner and would continue to rise.
The Westpac/Melbourne Institute Consumer Sentiment Index, a closely watched measure of consumer confidence, rose to a two year high in February.
But Sebastian said the pick-up in retail spending meant the Reserve Bank of Australia was unlikely to cut the cash rate again in the next few months.
"Now that confidence is turning around that is going to be a big support to activity over the next few months," he said.
"So the RBA can comfortably sit back on the sidelines and assess the data over the next couple of months."
The RBA cut the cash rate 1.75 percentage points between November 2011 and December 2012, bringing it to three per cent, equal to its post GFC low.
But Australian National Retailers Association president, Margy Osmond, said retailers needed more rate cuts to ensure further improvements to consumer confidence.
"I think we need to have interest rate cuts in our future to keep this momentum rolling along," she said.
She said while improvements in the housing market and equities had helped lift confidence, the January figures may also have been boosted by federal government payments to families through the school kids bonus.
Westpac senior economist Matthew Hassan said despite the positive January result, retail trade figures were patchy from month to month and the weak jobs market could dampen consumer confidence.
"The consumer is still concerned about potential job losses and is retaining a fairly cautious approach to spending decisions," he said.
The ABS figures showed almost all sub-sectors recorded a rise in spending during January, with the exception of department stores, which saw spending fall 0.6 per cent.
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