Economy: Retail growth shows RBA policy spot on

The latest figures show retail sales increased by 6.2 per cent over the past 12 months, after a 1.2 per cent boost in January - the fastest rate of annual increase since November 2009 - and even the usually gloomy department stores are happy about it.

Spending in cafes and restaurants was up 2 per cent, and department stores 2.6 per cent, Bureau of Statistics figures show, with NSW recording the strongest spending growth of any state.

In fact, Australians have regained their appetite to eat out with spending at cafes and restaurants up 11.9 per cent over the past year.

''Retail sales are at last throwing off the malaise they have been in since 2010,'' AMP Capital economist Shane Oliver said.

Bureau of Statistics figures show retail sales in January were strongest in department stores, rising 2.6 per cent.

Spending at cafes and restaurants was up 2 per cent.

Across the other categories in January, there were increases in household goods (1.5 per cent), clothing, footwear and personal accessories (1.1 per cent) and food retailing (0.4 per cent).

It adds to the recent run of positive economic data and comes a day after the release of unexpectedly good economic growth numbers.

On Wednesday, Federal Treasurer Joe Hockey indicated that his first budget will be far less tough than believed after economic growth for the year hit 2.8 per cent.

Economists say the retail sales figures tell us things about the economy that we may not have realised yet.

For one, they show the Reserve Bank's monetary policy is having a positive effect.

''Consumers are responding to low interest rates and rising asset prices,'' Commonwealth Bank economist Gareth Aird said.

''[It] provides further evidence that policy stimulus is working and that the growth transition is under way.''

For the states, retail trade growth was strongest in NSW over January, up 2.1 per cent, in line with the largest house price appreciation in the country.

There were also increases in Victoria (1 per cent), Queensland (1.2 per cent), South Australia (0.6 per cent), Tasmania (1.8 per cent) and the Northern Territory (3.3 per cent). However, retail sales fell in Western Australia (-0.3 per cent) and the ACT (-1.9 per cent) in January.

''Retail trade growth in WA has been relatively soft over the past year and we suspect that some of the softness can be attributed to discounting on services as mining construction slows,'' Mr Aird said. ''The NSW WA divide is another indication of the growth transition.''

But the retail associations were quick to jump on the news, saying 2014 was ''starting'' to look promising for the retail sector.

''It's great to see such strong trade results for January,'' Australian Retailers' Association executive director Russell Zimmerman said. ''Retailers were optimistic that the post-Christmas sales period was extremely successful this year … and we are pleased to see today's results confirm these predictions.''

Myer and David Jones are in a media black out before the release of their half yearly results, so they could not comment on the data.

But Annette Beacher from TD Securities said the data shows the economy is growing faster than the Reserve Bank expected.

''The recent string of "feel good" data … could be the key to stimulating investment and employment this year,'' Ms Beacher said.