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February 06 2013, 3:58PM

Retail spending has fallen for three consecutive months, a sign that rising unemployment is weighing on consumer confidence.

Retail trade was down 0.2 per cent in December, seasonally adjusted, well below expectations of 0.3 per cent rise for the month.

The December result followed a 0.2 per cent fall in November and a 0.1 per cent fall in October, figures from the Australian Bureau of Statistics showed on Wednesday.

December spending was up in department stores, but down in cafes and restaurants.

Westpac senior economist Matthew Hassan said the figures showed an underlying shift in consumer demand.

"We had a fragile consumer picture through the second half of last year, particularly around mid year with a very significant rise in fears around job losses and that may have come through to spending," he said.

"Some of this is caused by industry specific issues with online sales from offshore providers, but even allowing for that it does point to a much softer consumer demand picture from late last year than originally indicated," he said.

Mr Hassan said he expected the central bank would cut the cash rate at its March board meeting after deciding not to cut on Tuesday.

Australian National Retailers Association chief executive Margy Osmond described the retail slump as an "enormous disappointment".

"The topsy turvy results won't bode particularly well for the retail sector going into 2013."

An increase in online shopping meant fewer dollars were staying onshore, Ms Osmond said.

"We speculate that at least eight per cent of the normal Christmas spend has gone straight overseas," she said.

A National Australia Bank online spending survey, released on Monday, showed there was a large volume of low value online transactions in December for items such as toys, games, music, movies and books.

This sector accounted for 22 per cent of total spending but almost 69 per cent of all transactions.

The NAB survey showed that online sales also increased after Christmas with the traditional sales spreading to the internet in a more significant way than in previous years.

CommSec economist Savanth Sebastian agrees that retail trade figures picked up during the post-Christmas sales, as shoppers hunted for discounts.

"Internal Commonwealth Bank data highlighted that any presence of significant retail activity was solely dominated by post-Christmas sales, with Boxing Day sales up 20 per cent on 2011," he said.

"It is clear consumers are largely being enticed to spend if deep discounts are on offer.

"Those results don't bode well for retailers, with activity skewed towards lower-margin transactions."

Mr Sebastian said the December retail data wouldn't change the central bank's interest rate outlook and he didn't expect a rate cut in the near term.

Cafe and restaurant spending fell 1.1 per cent in December, seasonally adjusted, but 'other retail spending' was the category with the biggest fall in the month, 2.8 per cent.

However, department store sales were up 0.8 per cent in December, and the clothing and footwear category had the biggest gain, up 2.1 per cent.

By Jason Cadden