Within household goods retailing, a 2.5 per cent drop in turnover in electrical products may well reverse over August, Capital Economics chief Australia economist Paul Dales said, but the third consecutive month of falling furniture sales may prove a more lasting phenomenon amid a decline in home sales.

"With fewer people moving home, fewer sofas are being sold," Mr Dales said. "That direct impact will probably get worse."

Also weighing on July's monthly spending number was a 2 per cent drop in the clothing and footwear segment, and a 1.9 fall in department store sales, the ABS data showed.

Those falls were offset by a 1.7 per cent rise in the "other retailing" segment, while spending on food increased 0.3 per cent and by 0.6 per cent in the cafes, restaurants and takeaway food segment.

Retail sales were flat in July but are still improving in year-on-year terms. ANZ

No change tipped for monetary policy

By state, only Queensland experienced a lift in spending over the month, by 0.8 per cent, while New South Wales was flat.

Economists cautioned against reading too much into a single weak retail data point. Prior to Monday's release turnover had remained relatively resilient over recent months, with turnover through the June quarter coming in well ahead of forecasts.


On an annual basis, retail turnover increased to 2.9 per cent from 2.8 per cent in the prior month, although that sits well below average annual pace of 3.8 per cent over the past 10 years.

July's poor outcome suggests that the Aussie consumer had started the second half of the year on a more cautious footing, but falls in some utilities prices and easing petrol costs, alongside the prospect of income tax cuts, will "all provide material offsets" in the coming months, Ms Masters said.

Annual growth in home sales have led household good sales. Capital Economics

"We continue to watch household spending closely given the obvious headwinds, but think the consumer can muddle through this year," she said.

The resilience of the consumer, which accounts for approaching 60 per cent of domestic demand, is a key point of contention between Reserve Bank economists and their private sector peers, with the latter generally more cautious on the outlook for household spending.

The RBA has acknowledged in statements accompanying recent monetary policy decisions that a "continuing source of uncertainty is the outlook for household consumption".

The RBA board when it meets Tuesday is likely to extend the longest period of unchanged monetary policy by another month, a day before the release of June quarter national accounts figures.

The central bank's cash rate target has remained at an historical low of 1.5 per cent since August 2016.