If retailers were not in enough strife already, it now appears falling house prices have joined low wage and price growth, as well as declining household savings, in their increasingly large list of worries.

Monthly retail sales figures have disappointed again, rising just 0.2 per cent in September on a seasonally adjusted basis.

This compared with the more bullish, but still fairly insipid, forecast of 0.4 per cent growth by market economists.

More disturbingly, sales were up just 0.2 per cent across the three months of the September quarter.

It was also below forecasts and a marked stepdown of the 1 per cent growth recorded in the June quarter.

Falling house prices hit discretionary retail

While the broad measure of house prices has been falling for the past year, the downturn in the September quarter coincides with the more affordable, bottom quartile of the property market turning negative.

With the exception of cafes, restaurants and takeaway, the other key discretionary sectors such as household goods, clothing and department stores reported either flat or negligible sales growth.

"The subdued rise in real retail sales in Q3 suggests that households are starting to feel the pinch from rising petrol prices and the slowdown in the property market," Capital Economics analyst Marcel Thieliant said.

"With the full effects of falling house prices yet to be felt, we think spending will slow further next year."

Food was one of the few sectors which recorded any growth, up 0.4 per cent — largely due to price rises rather than increased volumes.

"Sales of household goods were unchanged in September relative to August," Mr Thieliant said.

"Given that home sales fell to a fresh 23-year low in October we think that weakness will continue."

Impacts flow to broader economy

RBC's Su-Lin Ong said weakening consumer sentiment will start being an even bigger drag on the broader economy.

"Despite a reasonably healthy labour market, it is likely that the persistently soft pace of wages growth, declining savings buffer, and weaker housing market are finally catching up to the consumer," Ms Ong said.

"This remains consistent with our base case for some rotation in activity as we head into 2019, with household consumption set to move to a sub-2 per cent pace and housing construction set to turn into a drag on activity next year."

Ms Ong said this will flow into other sectors and may temper the continued growth in public spending, net exports and business investment.

"Overall activity may well remain above-trend next year, but momentum seems set to moderate and there remains a considerable degree of uncertainty over the unfolding housing moderation, the cost of funding and global growth."