Retail sales grew by a marginal 1% month on month and 3% year on year in January, according to the latest ABS retail sales figures.

The seasonally adjusted rise of 0.9% on December’s results comes off a low base following drops in monthly trade figures in the two preceding months.

ARA executive director Russell Zimmerman says the rise is a good sign for the retail sector but only time will tell whether the rise can be sustained over the course of 2013.

“Delving into the figures across separate categories, of concern is department stores reporting the smallest sales increase; this category relies heavily on post-Christmas sales, and it shows consumers are focusing more on smaller purchases, such as food (4.4% rise year on year) rather than discretionary items,” Zimmerman says.

“Consumer reticence to spend across discretionary spending areas such as department stores and fashion is proof Australian households are under financial strain and need relief from interest rates, tax pressure and other increases in the cost of living and affording the basics such as utilities and fuel.”

The RBA met earlier today but left interest rates on hold at 3.0%, going against the urgings of the sector.

Household goods retailing performed the strongest (apart from miscellaneous retail categories) of the major categories month on month, up 1.3%, while department stores were the weakest, down 0.6%.

Across the states and territories, performance was stable with all coming in at around 1.0%, apart from Western Australia which dropped 0.4%. Year on year however, Western Australia was the strongest grower with a jump of 5.8%.

Cafes, restaurants & takeaways, up 3.6%, and food retailing, up 4.4%, were the strongest performing sectors year on year.

Retail growth came to a grinding halt in October with sales coming in at exactly the same level as in September.

In the lead up to Christmas, the 0.0% month-on-month result points to a climate where consumer spending is still supressed by a range of pressures. Compared to last year, October showed marginal growth of 3.1% — small comfort for retailers, according to executive director of the Australian Retail Association (ARA), Russell Zimmerman.

“It’s clear from the figures that there needs to be an interest rate cut today in order to stimulate consumers and ensure any available cash is put into their pockets in the lead up to Christmas,” Zimmerman says.

Month on month, most retail sectors remained flat during the period, apart from food retailing which grew 0.9% and household good retailing which dropped by 1.6%.

Year on year, the month of October performed slightly better than last year, with cafes, restaurants and takeaways up 5.4%, food retailing up 5.0%, clothing, footwear and personal accessory retailing up 3.2%, department stores up 2.8% and other retailing up 1.5%, while household goods was the only sector to decline, down 1.5%.

Zimmerman believes October’s rates cut wasn’t passed on swiftly enough by the banks the rate hold in November combined to make spending unsustainable for consumers.

“Two weeks ago, the ARA estimated shoppers would bag $41.2 billion in Christmas presents before Christmas Day, which is a 3.9% rise on last year’s spend in the same period,” he adds.

“Consumer confidence is somewhat shaken at the moment, with bills rushing in as a result of costs associated with utilities, the carbon tax and other pressures on household budgets.

“Many retailers have started Christmas trading feeling positive about what they can bring to their customers and having invested in offering the best possible shopping experience — the investment is a leap of faith as they wait with bated breath for key regulatory changes and sensible decisions regarding monetary policy.”

Retail sales rose 0.5% month on month and 3.5% year on year in May, a modest increase which could be due to the cold snap southern states experienced during the month.

But the upward trend will be short lived as increased pressure on household budgets catches up with consumers, according to executive director of the Australian Retailer’s Association (ARA), Russell Zimmerman, who predicts zero trade growth for the rest of the year.

Whether perceived or real, the impact of the carbon tax is expected to impact on shopper behaviour. “Families have recently been hit hard with more financial pressure as a result of the carbon tax, which the ARA does not believe has been adequately compensated for,” Zimmerman says.

Discretionary spend categories of household goods retailing, up 0.8% month on month and 0.4% year on year, department stores, up 1% month on month and 0.9% year on year, and clothing, footwear and personal accessories, up 0.5% month on month and 1.7% year on year, experienced sales increases across the board – a rare occurrence for 2012.

“Cool May weather in the southern states is a reason for the spike in trade figures we have seen,” Zimmerman explains. “Categories which rely on consumer discretionary spend such as department stores, clothing and footwear and household goods have enjoyed a modest boost for the first time in quite a few months – both month on month and year on year.”

Food retailing which had been performing strongly stalled, with a 0.1% month on month decrease, but is still up 3.7% year on year. Cafes, restaurants and takeaway food services continued to perform well with a 1.4% month on month increase and 8.2% year on year gain.

New South Wales, Victoria and Queensland all clocked month and month and year on year growth for May, while Western Australia performed the strongest up 1.1% and 10%. South Australia, Tasmania and the ACT recorded mixed results.