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Real retail sales fell in the last three months of 2008, the fourth consecutive quarterly decline, despite the boost to household spending power from lower petrol prices, tax cuts and falling mortgage rates.
"Christmas was not a good one for retailers," Westpac economist Doug Steel said.
In the month of December sales were down 0.9 per cent on December 2007.
If the automotive sector, which makes up about a quarter of retail sales, is excluded sales were up 1.7 per net on a a year earlier but over the same period consumers price index inflation was 3.5 per cent.
For the whole December quarter total sales were down 1.5 per cent on the same period in 2007, and down even more - 3.7 per cent - when adjusted for price changes.
Compared with the September quarter and seasonally adjusted they were down 1.1 per cent in dollar terms and down 0.6 per cent in volume terms.
The biggest falls were at the car yards (down 4.9 per cent on the previous quarter) and among bars and clubs.
Compared with the December 2007 quarter, sales volumes were 4 per cent lower, with the biggest decline recorded by vehicle sales.
But while the December quarter continued the pattern last year where each quarter saw less stuff going out retailers' door than the quarter before, at least the rate of decline is slowing.
And while stocks were up on the same period last year it was not by as much as in previous quarters.
ASB chief economist Nick Tuffley said the figures showed that as petrol prices fell the extra cash was not recycled back into other spending.
Petrol prices fell about 20 per cent over the quarter with the result that people spent $151 million less at the pump. But total retail spending fell even more - $179 million.
Tuffley said the retail sales figures suggested the economy contracted 0.5 per cent in the December quarter, the biggest quarterly decline in gross domestic product yet in this recession.
Steel said the hit to many consumers' wealth from falling house and share prices had been a key reason behind the general reluctance to spend.
And house prices were expected to keep drifting downwards this year, he said.
"Rising unemployment, less job security and concerns about how the world economic recession will hit home are all adding to the cautious tone - and atmosphere likely to remain through 2009," he said.
Electronic card transaction data suggested retail sales had eased again in January.
