Retailers face their toughest Christmas since the global financial crisis amid signs the post-election bounce in business and consumer confidence is ebbing.
A key retail indicator out today from the Food and Grocery Council suggests only food will be in strong demand this Christmas.
The council-CHEP retail index points to sub-par growth in the $22-billion-a-year retail sector.
WA's retail sector has been the hardest hit in the country. In the run-up to Christmas last year, retail turnover was growing at 10 per cent across the State.
But it has fallen to 2 per cent, lower than the inflation rate, with every chance it could fall even lower by year's end.
The index found the slowdown in resources investment in the past year had translated into subdued jobs and wages growth through this year.
Council chief executive Gary Dawson said the retail sector was counting on a turnaround.
"Retail sales growth is certainly underperforming against longer-term trends, with the growth rate halving over the course of 2013," he said.
"Retailers will be hoping the recent improvement in consumer confidence will assist sales growth this Christmas."
Department stores, which rely heavily on Christmas, have been hit hard this year, with sales expected to be lower than last year.
They have been hit by a fall in sales and price deflation.
The rise in the Australian dollar in the past few weeks is expected to add pressure to department stores and other discretionary shopping outlets.
Despite a substantial lift in business and consumer confidence since the Federal election, there are few signs this has translated into a boost in actual economic activity.
There has been a continuing improvement in house prices, with Sydney's up 11.6 per cent in the past year. Perth house prices are also up 6.5 per cent.
Treasurer Joe Hockey, who needs a good Christmas period to boost the Budget, said he was hopeful the economy was not losing its post-election momentum. "You can see it in property transactions and property prices that there's confidence coming back," he told the Nine Network.He was confident of a good Christmas from retail and employment perspectives.