SYDNEY, Aug 30 Reuters Australian retail sales were flat in July after two months of upbeat results, showing largescale tax cuts were yet to boost spending and firming expectations the next move in interest rates will be down.

Data from the Australian Bureau of Statistics ABS on Friday showed retail sales were unchanged in July monthonmonth, slowing from the 0.5 rise in June. Analysts had expected a 0.3 increase in July.

Sales rose 2.3 from a year earlier, slowing from previous month39;s 2.9 as consumers grappled with inflation and high mortgage rates. That was a weak result compared with the country39;s population growth of about 2.6.

Spending on clothes and at department stores took a hit, down 0.6 and 0.5 monthonmonth, respectively, in July, while cafes, restaurants and takeaway food all saw a drop of 0.2 as shoppers turned frugal.

Food retailing was the only category that saw an increase, up 0.2. Indeed, Australian grocers Coles and Woolworths both posted decent profits.

Overall, it39;s clear there was little momentum behind consumer spending at the start of the quarter. And while it is early days, the data broadly reinforce our view that Australian households are not rushing to spend their newfound tax cuts, said Abhijit Surya, Australia and New Zealand economist at Capital Economics.

At the margin, the weakness in household consumption raises the risk that the RBA will cut rates before Q2 2025 as we39;re currently forecasting.

This weakness is the result of…