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Discounts, dept stores hit July sales

AAP logoAAP 1/09/2016

Discounting and weak department store trading dragged down Australian retail sales in July.

Total retail spending around the country was $25.01 billion in July, unchanged from June, according to the Australian Bureau of Statistics on Thursday.

However sales volumes did not fall in the month, indicating that the primary drag on the figures was softer pricing.

Australian Retailers Association executive director Russell Zimmerman said consumers were likely still reluctant to spend in that month due to concerns over the federal election outcome and the Brexit vote.

"By July, mid-season sales have also slowed down, with many retail businesses having focused their discounting activities in June in an effort to prop up sales in the face of unseasonably warm winter temperatures," he added.

Footwear and personal accessory sales rose 0.6 per cent and cafes, restaurants and takeaway sales were up 0.5 per cent.

But they were offset by the big fall in department store trade, and also household goods sales slipping 0.4 per cent.

JP Morgan economist Tom Kennedy noted that since 2008 the month of July had been a typically volatile period, with the monthly change in sales more than double the average throughout the year.

"The good news is that the volatility in July is usually unwound in subsequent months, so we would not be surprised to see some of this fall unwind in August," he said in a note.

Mr Zimmerman said the ARA holds some hope that the August interest rate cut, to a record low of 1.5 per cent, would have some effect on consumers' confidence and their willingness to spend in the coming months.

"However, should the trend of stagnant growth continue much longer, it becomes likely that the important Christmas shopping period will not be as profitable for retail businesses in 2016," he said.

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