By Swati Pandey

SYDNEY, Feb 6 (Reuters) - Australian retailers suffered their worst month in nearly 2-1/2 years in December as shoppers were discouraged by bushfires that blazed along the south-eastern coast of the country and stoked smoke haze over the biggest cities of Sydney and Melbourne.

Retail sales dropped 0.5% in December, the worst monthly performance since August 2017, to A$27.77 billion ($18.75 billion) when economists polled by Reuters had forecast a 0.2% fall.

Figures for November were upwardly revised to show a brisk 1% gain.

Australia's A$2 trillion ($1.35 trillion) economy has run out of puff after nearly 29 years without a recession as consumers struggling with stagnant wages and sky-high debt sharply cut back on spending.

Adding to the gloom, the bushfires and a fast spreading virus in China - Australia's top trading partner - are further threatening broader activity.

The quarterly data for the three months to December did show some encouraging signs with sales up a larger-than-expected 0.5% in inflation-adjusted terms following a 0.1% decline in the September quarter.

Yet much of those gains were due to the blockbuster November sales led by Black Friday promotions and analysts expect the first quarter of 2020 will see a return of tepid consumption.

The pedestrian economic activity is becoming an increasing headache for Prime Minster Scott Morrison who has pledged support to rebuild communities ravaged by the prolonged bushfire season.

The weak private consumption comes despite the Reserve Bank of Australia's (RBA) three interest rate cuts to 0.75% last year. Government giveaways also provided little impetus with billions in tax rebates being saved rather than spent.

($1 = 1.4808 Australian dollars)

(Reporting by Swati Pandey; Editing by Shri Navaratnam)

((swati.pandey@thomsonreuters.com; +61 2 9321 8166; Reuters Messaging: twitter.com/swatisays))

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