However, while the Commonwealth Bank of Australia (CBA) business sales indicator index in July signalled a turning point for retailers, the bank said any further improvement in consumer spending depended upon the direction of interest rates and the jobs market.
Commonwealth Bank corporate financial services general manager Symon Brewis-Weston said the latest figures, while not a stunning result, signalled a turning point for retail conditions.
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"There appears to be light at the end of the tunnel for retailers, Mr Brewis-Weston said.
"The improvement in spending, the best result recorded since December last year, indicates we are on the cusp of a stronger second half."
The index was broadly unchanged in trend terms in July after six months of declines and over the past year the index fell by 1.5 per cent in trend terms, for the weakest result in the six-year history of the spending gauge.
The bank report said the weakness in consumer spending over 2010 mirrors the poor conditions expected in 2008 when the global financial crisis was at its height.
CommSec chief economist Craig James said that further improvement in retail conditions would depend on certainty over interest rates and the job market.
"Stability in interest rate settings over the next few months together with a firm job market are prerequisites for a continued recovery of consumer spending over the remainder of 2010 and into 2011.
"At this stage we wouldn't be getting hopes up, but the data points to some stabilisation of consumer and business spending after recent trend declines," said Mr James who is also the index's author.
Spending was strongest in the utilities sector, with a 1.5 per cent rise in trend terms, the next best was personal service providers, which was up 1.2 per cent in trend terms.
The weakest sectors were automobiles and vehicles, down 1.5 per cent; mail order and telephone orders providers, down 1.3 per cent, and retail stores down 1.2 per cent.
In annual terms, Queensland was down 5.4 per cent for the year, while spending was strongest in the ACT and the Northern Territory, up 3.3 per cent and 2.2 per cent respectively.
Mr James said spending in Queensland remains a concern.
"It appears that the downturn in tourism is hitting the Sunshine State to a greater extent than other states and territories.
"In contrast to Queensland, spending growth is in far stronger shape in the Top End with spending in the Northern Territory rising over both the month and the year, supported by a strong job market and rising property prices," Mr James said.
