Australian retail sales slid in December as pay back for two months of spectacular gains and a further slowdown was likely this month as a surge in coronavirus cases led to a self-imposed lockdown by many consumers.
Figures from the Australian Bureau of Statistics out on Tuesday showed retail sales fell 4.4% in December to A$31.9 billion ($22.53 billion), after a huge 7.3% jump in November.
Sales were still up 4.8% on a year ago and sharply higher for the December quarter as a whole, suggesting household spending made a major contribution to economic growth.
"Retail sales remain elevated compared to pre-pandemic levels, with December's monthly turnover the second highest level in the series following last month's record," said Ben James, director of quarterly economy wide statistics at the ABS.
That strength will likely be welcomed by the Reserve Bank of Australia (RBA), which holds its first policy meeting of the year on Tuesday, and is one reason it could decide to end its bond buying campaign this month.
It is widely expected to hold interest rates at a record low of 0.1%, but analysts argue the economy no longer needs the additional stimulus from asset purchases.
The central bank will also have to lift its forecasts for inflation after consumer prices rose a surprisingly sharp 3.5% in the year to December, while core inflation jumped to 2.6%.
The bank had not expected core inflation to reach 2.5% until the end of next year and financial markets are wagering it will now be forced to hike rates as soon as May.
The omicron wave did put a dent into consumption early in January, but growth in cases has since leveled off and weekly spending on bank cards is slowly recovering.
Households still have a huge buffer of savings amassed during the long lockdowns, while a strong labor market has kept people in jobs and earning a wage.
Data on household bank deposits out on Monday showed another A$20 billion was squirreled away in December, leaving them A$242 billion higher than before the pandemic.
"This store of highly liquid savings is now equivalent to around a 20% of annual household consumption, and suggests that in aggregate business and household balance sheets are in good shape," said Taylor Nugent, an economist at NAB.
Household wealth has also been fattened by a boom in home prices, with annual growth hitting 22.4% in January for the biggest gain since 1989.
The ABS estimates the housing stock was worth A$9.3 trillion at the end of September, having climbed A$1 trillion in just six months.