Christmas spending is expected to slow down as weak consumer confidence continues into the festive season, a retail index says.
The Australian Food and Grocery Council and pallet and packaging company CHEP expect year-on-year growth of 2.9 per cent for the December quarter, well below the 10-year average of five per cent.
It is also softer than the year-on-year growth for the September quarter of 3.7 per cent.
The AFGC CHEP Retail Index is also expecting a slight contraction in retail turnover in November to $21.52 billion, from $21.56 billion in September.
AFGC chief executive Gary Dawson said while the Reserve Bank's recent interest rate cuts have helped the retail sector, consumer sentiment was still being adversely affected by broader economic conditions.
"The Reserve Bank's decision to cut interest rates over the last six months has helped boost retail trade conditions, but overall the broader economic backdrop is creating a soft retail environment heading into Christmas," he said.
"We're hoping that another cut in interest rates will send the right signals to households so they embrace this summer season with more optimism."
He said food manufacturers were also being hit by rising costs for commodities, labour and energy and retail price deflation was cutting margins.
CHEP Australia and New Zealand president Phillip Austin said while the predicted growth over the Christmas period was modest it was still encouraging for retailers.
"Further, the prospect of improved summer conditions may offer stronger growth prospects in traditional seasonal categories," he said.
Australian National Retailers Association chief executive Margy Osmond has previously said she expected Christmas spending to be slightly higher than last year.
She said while she expected growth to be modest, local retailers believed given the fact that consumers had been saving during the year they may pick up their discretionary spending at Christmas.