Fears of a recession in early 2023 are set to be eased on Wednesday as experts prepare for robust economic growth when the Australian Bureau of Statistics releases the national accounts for the December quarter.

But with economists still unsure whether record interest rate hikes are driving a big enough slowdown in spending to curb inflation, attention will be focused on what families were buying late last year.

That’s because an economic downturn isn’t evident yet, however one is more likely if resilient spending sparks an even tougher RBA response.

It’s the “missing piece of the puzzle” that will influence the outlook for mortgage bills in 2023, BIS Oxford Economics’ Sean Langcake said.

“There is a pullback in spending happening,” Mr Langcake told The New Daily.

“But is it because we’re now rebalancing away from goods towards services, or is it a more general spending slowdown?

“That’s the million-dollar question.”

No recession in sight, yet

Analyst forecasts for economic growth on Wednesday are centering around 0.7 per cent in the December quarter, or 2.7 per cent annually.

That would be a slight rise on the September quarter and still above decade averages since the COVID-19 recession in 2020.

It’s set to be underpinned by ongoing growth in household consumption, as well as solid increases in international trade and capital expenditure.

Mr Langcake predicts a “good number” – with no recession evident, yet.

“It’s not going to give any ammunition to those saying a recession is on the doorstep,” he said.

But if household consumption is more resilient than anticipated, RBA boss Philip Lowe has already flagged even higher interest rates.

And that could spark a fresh downturn in which unemployment rises more than forecast under the weight of consumers struggling with their bills.

Spending puzzle

That’s why experts are focused on the household spending portion of Wednesday’s national accounts, alongside figures on family savings.

It will put the picture into focus after conflicting retail sales figures that showed a slowdown over Christmas followed by a January rebound.

Monthly retail sales rose 1.9 per cent, the ABS revealed on Tuesday, with turnover at a similar level to September – which was before holiday spending and the most recent rate hikes.

Mr Langcake said the rebound in sales growth still suggests a slowdown in spending because rising prices are inflating the value of consumption, implying a reduction in retail volumes.

Deloitte Access Economics partner David Rumbens also thinks retail sales are “going backwards” when adjusted for sky-high inflation rates.

“We’re entering a period where higher interest rates will take a chunk more out of disposable incomes for consumers,” Mr Rumbens said.

“We’re seeing consumers become more value conscious, and saving money by purchasing lower-cost alternatives.

“For example, 27 per cent mostly purchased store brand products in January 2023, up from 22 per cent in September 2022.”

But Mr Langcake said it’s hard to tell from retail data alone whether consumers are tightening their belts enough to reduce inflation in 2023.

That’s because those figures don’t include services spending, which is becoming a bigger part of our budgets since the COVID lockdowns.

Wednesday’s data will provide a fresh read on this services spending, alongside insights into the level of household savings.

Together these measures will provide a clearer picture about the outlook for consumption, and by extension interest rates throughout the year.

Household consumption already grew 11.4 per cent in the year to September 2022, but this figure includes a rebound from lockdowns.

Moving forward, the RBA expects the pace of spending growth to slow to 5.5 per cent in annual terms by June – a figure it believes would be consistent with inflation falling without sparking a recession.