A sluggish economy and financially constrained consumers have kept pressure on the sector, with real retail spending in decline for six of the past seven quarters.
Deloitte Access Economics partner David Rumbens said Australia's retail sector had effectively been in recession for the past 18 months, with real spending contracting 0.6 per cent over the year to June.
"This sits against a backdrop of poor conditions across the economy more generally, with the labour market weakening and business insolvencies rising," Mr Rumbens said.
Fresh inflation data is unlikely to alter the Reserve Bank of Australia's views on persistent price pressures either, suggesting interest rates will be staying high for some time yet.
Wednesday's monthly indicator showed inflation moderating to 3.5 per cent in July, from 3.8 per cent in June, helped lower by state and federal energy rebates.
Though the central bank is more focused on underlying inflation, which also moderated over the month but remains uncomfortably high.
Mr Rumbens said the cost-of-living relief flowing through to households in the form of lower energy bills and tax cuts would boost household incomes and "help to lift retailers out of recession".
"As a result, 'retail recession – the sequel' is expected to be short and shallow," he said.
The economics group was forecasting a return to real retail sales growth in 2024, of 0.3 per cent, strengthening to 1.5 per cent in both 2025 and 2026.
"Stronger real retail sales growth will also be supported by price moderation, as broader inflation tracks down," he said.
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