(Bloomberg) -- Australian retail sales almost stagnated in April as higher borrowing costs and still-elevated inflation encouraged households to save more and spend less. 

Sales advanced 0.1% from the prior month, slower than economists’ estimated 0.2% gain, government data showed Tuesday. The outcome follows a 0.4% decline in March. 

Australian consumer discretionary stocks are on track for a second straight month of losses. Households are hunkering down at the prospect of interest rates remaining higher for longer to stamp out inflation. 

Consumer sentiment has been in the doldrums for more than two years as mortgage repayments ratcheted up. All eyes will now be on the monthly inflation figures due Wednesday with economists predicting the gauge will ease to 3.4% — still above the Reserve Bank’s 2-3% target range. 

Read more: Australia’s Spike in Young Unemployed Signals Weaker Job Market

The RBA next meets on June 17-18 and is expected to leave its key rate at a 12-year high of 4.35%. The board has placed a high bar to raising rates again, while saying further tightening cannot be ruled out. 

Economists expect the next move to be down with the first rate cut likely in November. Money market bets imply an easing cycle will only start in the first-half of 2025. 

From a year earlier, retail sales climbed just 1.3%, running well below the 4-5% pace seen in early 2023 as rate rises and other cost-of-living pressures weigh on household spending.

Retail sales can be an important consideration in policy decisions given consumption accounts for more than half of gross domestic product. The RBA has repeatedly highlighted that the outlook for household spending remains a key uncertainty.

Thursday’s retail data also showed:

  • Other retailing rose 1.6%, while household goods sales climbed 0.7%
  • Clothing, footwear, and personal accessory retailing slid 0.7%
  • “The relatively earlier Easter and the different timing of school holidays across the country meant we saw some added volatility in turnover in March and April,” said Ben Dorber, ABS head of retail statistics

--With assistance from Tomoko Sato and Georgina McKay.

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