Consumers took the first rate hike in more than a decade in stride with spending hitting an all-time high in May, but economists expect further hikes and high inflation to eventually take their toll.

Retail grew by more than expected 0.9 percent in May to a record $34.2 billion, a healthy 10.4 percent higher than a year earlier, according to the Australian Bureau of Statistics.

It was the fifth consecutive monthly increase in retail sales.

“There was growth in five of the six retail sectors in May as spending remained resilient,” ABS director of quarterly statistics for the economy as a whole, Ben Dorber, said Wednesday.

“Higher prices contributed to the retail sales growth in May. This was most evident in cafes, restaurants and takeaway and food retail.”

Economists had expected a more moderate result as the data coincided with the Reserve Bank’s first rate hike since November 2010, of 25 basis points.

The central bank followed suit in June with a 50 basis point gain, the largest gain since February 2000, leading to a nearly eight percent drop in confidence, which has only partially recovered since.

“Retail spending is likely to slow from here on out as consumers struggle with a rise in interest rates and high inflation,” said AMP senior economist Diana Mousina.

“May data would reflect the RBA’s first rate hike, but it could take a few months to see the impact in retail data as consumers adjust spending.”

Economists expect a further 50-point hike at next week’s July board meeting and possibly another in August if inflation for the June quarter – due to be released on July 27 – proves strong.

“Along with May’s Labor Force report and the minimum wage decision, this stronger retail report confirms our view that the RBA will yield another 50 basis point rate hike in July,” said Commonwealth Bank senior economist Belinda Allen.

RBA Governor Philip Lowe has made it clear in his recent public appearances that the board will do everything it can to bring inflation back into the target range of two to three percent.

The central bank expects inflation to rise to seven percent by the end of this year.

In confirming Australia’s triple-A credit rating on Tuesday, Moody’s Investors Service said it expects a significant rise in RBA interest rates, leading to moderation in inflationary pressures in 2023.

Moody’s expects the Australian economy to grow by 3.2 percent in 2022, reflecting solid consumer demand growth as households use up their pandemic savings, and positive employment prospects.

GDP growth will moderate to 2.6 percent in 2023 as tighter monetary policy leads to a modest slowdown in consumer demand.