Shoppers have pounced on sales and fuelled an unexpectedly strong month for retail but the preoccupation with discounting suggests consumers are feeling squeezed.
A solid 0.7 per cent boost in May was well below the 0.1 per cent expected by economists and followed a flat result in April and a 0.4 per cent lift in March.
The Australian Bureau of Statistics said retail turnover had been supported by higher spending on food and eating out, as well as a boost across non-essentials.
"This latest rise reflected some resilience in spending, with consumers taking advantage of larger-than-usual promotional activity and sales events for May," head of statistics Ben Dorber said.
Cost-of-living pressures were likely pushing people to take advantage of sale events, much like they did during Black Friday last year, Mr Dorber said.
The category known as "other retailing", which includes online-only retailers, florists and pharmaceutical and cosmetics retailers, recorded the largest rise over the month of 2.2 per cent.
The ABS chalked up this increase to an early start to end-of-financial-year discounting and the Click Frenzy Mayhem sales, as well as Mother's Day.
Household goods retailing lifted 0.6 per cent, although the increase followed three straight months of declines.
Two other major discretionary categories fell over the month, with clothing, footwear and personal accessories down 0.6 per cent and department stores falling 0.5 per cent.
It followed a boost in sales over April after colder-than-usual weather prompted consumers to splash out on warmer clothes.
Turnover lifted 1.4 per cent across cafes, restaurants and takeaway food services and 0.3 per cent for food retailing.
Mr Dorber said the uptick in food-related spending was largely a product of inflation, with the consumer price index revealing a 7.9 per cent lift in food prices in the 12 months to May.
Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the heightened spending at sales would be a short-term win for retailers but spending had effectively been pulled forward, with the likely result of weaker spending in coming months.
He said the Reserve Bank would likely recognise the temporary nature of the May uplift, with household spending generally trending down as high inflation and rising interest rates cut into budgets.
"The data is unlikely to move the needle for the RBA and we still expect to see two more rate hikes in the coming months."
Ahead of the July cash rate decision next week, the RBA will also be weighing up weaker-than-expected inflation for May as well as resilient job vacancy numbers.
While the number of job vacancies fell two per cent between February and May, they remain almost 90 per cent higher than pre-pandemic levels.
Commonwealth Bank of Australia economists Harry Ottley and Stephen Wu said the inflation figure would be the RBA's priority and be enough to keep the cash rate on hold in July before one more hike in August.
The bank's economists were hesitant to place too much emphasis on the strong May retail report with a longer-term view indicating sluggishness, especially in per capita and volumes terms.
"We continue to anticipate further slowing in consumer spending for the remainder of this year as the full extent of monetary tightening flows through and the impact of fixed rate roll off reaches its peak."
