SYDNEY, May 26 (Reuters) - Australian retail sales were flat in April as consumers, who face high living costs and rising interest rates, cut back spending on food and dining out, bolstering the case for a pause in rate hikes next month.
Data from the Australian Bureau of Statistics (ABS) on Friday showed retail sales were unchanged in April from March, when they rose 0.4%. Analysts had looked for 0.2% growth.
Sales of A$35.26 billion ($23.92 billion) were up 4.2% from a year earlier, slowing from the 5.4% growth in March.
While shoppers spent more on winter clothes and in department stores, they curbed spending on food and dining out, which registered declines of 0.1% and 0.2% respectively. Household goods fell 1%.
The slowdown in consumer spending is evidence that a whopping 375 basis-point tightening by the Reserve Bank of Australia since May is having the desired effect of cooling demand.
"Retail turnover has plateaued over the last six months as consumers spent less on discretionary goods in response to cost-of-living pressures and rising interest rates," said Ben Dorber, ABS head of retail statistics.
Retail sales volumes had already posted a fall in the first quarter, marking a second straight quarterly decline and indicating a drag on economic growth.
However, the central bank has warned that more rate rises might be required, citing upside risks to the inflation outlook, and this has prompted markets to price in the chance of another hike in August or September and a scenario of rates staying higher for longer.
Economic data over the past month has printed on the soft side. Quarterly gains in Australian wages missed forecasts, net employment unexpectedly dipped in April and the jobless rate ticked up, adding to the case for a pause next month.
"The rate of inflation in the economy will not drop to the desired level overnight. But the data is encouraging and is directionally moving the right way," said Gareth Aird, head of Australian economics at Commonwealth Bank of Australia.
($1 = 1.4743 Australian dollars)
Reporting by Stella Qiu; Editing by Muralikumar Anantharaman and Edmund Klamann