Australia's retail sector showed unexpected poor sales in July and broadly trickling down to the fragile profits of businesses still gaping for low demand for exports in Europe.

Just as local industries are counting on for local demand, sales in the home front plunged 0.8 per cent to $22 billion (A$21.4 billion) from the month of June, the Australia Bureau of Statistics said in the data released on Monday.

With the poor sales of local department stores and other retailers, gross operating profits slid 0.7 per cent in the April-June period. In the first quarter of 2012, ABS recorded a revised 3.7 per cent decline in operating profits for the sector.

This recent development had encouraged a growing sentiment among analysts that this is an important factor to urge the central bank to consider another rate cut soon.

The RBA is set to have another benchmark rate meeting and announcement on Tuesday, 4 September, to assess Australia's immediate economic concerns. The RBA has kept interest rates at 3.50 per cent after slashing it down a total 1.2 per cent from November 2011 to June 2012.

The government data indicated that consumer spending at department stores during the second quarter declined 10.2 per cent-the biggest plunge since April 2005. Other retail shops such as pharmacies, newspaper shops and bookstores reported a 2.8 per cent drop while a 2.4 per cent increase in consumer spending on household goods had been reported.

Market analyst Stan Shamu of IG Markets said "retailers are having a tough day on the back of the weaker-than-expected retail sales numbers. Harvey Norman, JB Hi-fi and Myer are down 2% to 3%. Tomorrow brings the RBA's interest rate decision where the Central Bank is widely expected to stay on holiday. Any dovish comments could weigh on the AUD further."