He goes from "hello beautiful" to "hey sexy" so should I step it up too?

me and this guy both like each other. but there are certain reasons why we aren't (idk if we CAN) dating right now. but we both pretty much admitted it...

anyways the last few months he'd approach me and say something like "hi gorgeous/beautiful" and give me a quick, cuter hug.

but the last week or so, he comes up to me and he'll say "heyy sexy" and smile (which I don't mind :) ) and when I hug him its longer, closer and more past a flirty hug...

i know I should respond differently, or step it up myself a bit, but how should i?

it doesn't exactly have to be PG, but I don't know if I'm bold enough to grab his butt or anything like that yet :P