MELBOURNE: Consumer spending in Australia showed some strength in September, as retail sales increased by the fastest rate in eight months. This could strengthen the argument for raising interest rates next week.

The Australian dollar gained 0.4% to $0.6360, and the three-year government bond yield reached a new 12-year peak of 4.388%. The market expectations for a quarter-point rate hike by the Reserve Bank of Australia in November rose to 61%, from 58% previously.

According to the Australian Bureau of Statistics (ABS), nominal retail sales went up by 0.9% in September compared to August, exceeding analysts’ forecasts of a 0.3% rise and an upwardly adjusted 0.3% increase for August.

Sales amounted to A$35.9 billion, a 2.0% rise from a year ago, and the first annual improvement since August last year when the yearly growth hit nearly 20%.

In the quarter, consumer resilience prevented retail volumes from falling, and analysts anticipated a 0.2% to 0.3% growth in the three months to September, which would be positive for economic expansion.

Interest rates have gone up by 400 basis points and have raised monthly mortgage costs by hundreds of dollars. The general weakness in consumer spending has been a key factor for the RBA’s decision to keep interest rates steady for four consecutive months.

Nonetheless, a persistent recovery in housing prices could boost household spending. Domain, a property website, projects that the housing market will fully bounce back from the recent slump by the end of this year.

U.S. retail sales surge 1.7% in October