SYDNEY, Feb 9 (Reuters) - Australian household spending fell in December as consumers drew back after splurging on year-end sales events, though sales volumes grew at a solid pace, underlining the central bank's decision to raise rates to rein in inflation just last week.
Data from the Australian Bureau of Statistics showed on Monday its monthly household spending indicator (MHSI) fell 0.4% in December to A$78.86 billion ($55.2 billion). That followed a 1% rise the previous month and a 1.4% jump in October.
The annual pace of spending growth slowed to 5%, from 6.3%.
"We saw high spending in October and November, which had major sales and cultural events boost spending," said Tom Lay, ABS head of business statistics.
"The fall in December indicates that households brought forward purchases during sales events in October and November."
For the quarter, sales volumes grew 0.9% from the previous period, a solid rise that should add to gross domestic product by 0.3 percentage points.
The Reserve Bank of Australia raised interest rates by a quarter point to 3.85% last Tuesday after three rate cuts last year led to a pick-up in inflation. Headline inflation, which ran at 3.6% last quarter, is expected to hit 4.2% by June this year, way above the RBA's target band of 2%-3%.
Robust consumer spending, record-high house prices and easy credit for households and businesses had added to the case that financial conditions might not be that restrictive.
Swaps now imply a 74% chance of another hike in May. There is an additional tightening of 37 basis points expected this year.
Monday's data showed spending on goods dropped 0.5% as consumers pulled back on buying clothing and footwear, as well as household appliances and tools, while spending on services slipped 0.3%, driven by lower transport costs and health spending.
"Looking ahead, the RBA's rate hike last week will weigh on spending growth in 2026," said Ben Udy, lead economist for Oxford Economics Australia.
"However, we expect inflation to cool over the course of the year which, along with solid wage growth, should prevent consumers from turning too sour."
($1 = 1.4225 Australian dollars)
(Reporting by Stella Qiu; Editing by Christopher Cushing & Shri Navaratnam)
