Department stores have fared worst in the latest retail trade figures by the Australian Bureau of Statistics.
The Australian Retailers Association (ARA) said the monthly decline of 0.8 per cent in July retail figures confirmed fears growth would drop after a short term spike driven by federal budget stimulus payments and cooler weather.
While there was 3.5 per cent overall year on year growth compared to July 2011, this figure was lower than June's year on year growth of 5.4 per cent.
Department stores fared worst out of all categories with a 10 per cent decline compared to June and a drop off of 5.4 per cent compared to July last year.
ARA executive director Russell Zimmerman said the results showed consumers were now feeling the effects of new stresses on household finances in the absence of June's stimulus payments.
“July retail trade figures suggest the boost retailers enjoyed in the two previous months, especially in discretionary spend areas, was always going to be short- lived.
“Retailers saw consumer spending fizzle out in July as households began to grapple with the effects of the carbon tax, changes in health fund rules and health insurance rebates.
"Those consumers affected by the changes are the very people retailers rely on to stimulate the sector, and this will no doubt lead to wider economic implications.
Zimmerman said the case is building for a cut in interest rates.
"Looking ahead to August and September figures, the ARA is expecting retail trade figures to drop further from their artificially higher midyear levels as utility bills roll in and are impacted for the first time by increased levies and taxes."
On a brighter note, while clothing, footwear and personal accessory retailing fell 0.9 per cent from June 2012 to July 2012, it recorded year-on-year growth of 6.6 per cent.