Australia’s seasonally adjusted consumer spending in October 2012 dropped 1.2%, as per the latest data by Commonwealth Bank‘s (CBA) Business Sales Indicator (BSI).

The strongest improvement in spending occurred in the Automobiles & Vehicles sector (up 0.7%), the CBA’s BSI noted.

Service Providers, Mail Order & Telephone Orders Providers and Hotels & Motels reported a drop of 4.6%, 4.1% and 0.9% respectively.

South Australia reported highest sales during the reporting period, followed by Tasmania , Northern Territory and Queensland and Victoria.

CBA local Business Banking executive general manager Adam Bennett remarked that the data is indicative of the challenging operating environment for retailers in the country.

"Over the past five months, solid monthly gains have been exactly offset by losses, creating inconsistent and challenging operating conditions for businesses," added Bennett

Bennett said, spending was still up 6.2% compared to a year ago.

CBA broking subsidiary COMMSEC and author of the BSI, Chief Economist Craig James believes the latest figures are reflective of subdued consumer sentiment and outlook.

"Aussie consumers are still spending, but very selectively, as evidenced in mixed spending results across sectors. There are few signs that consumers are becoming more upbeat, ensuring business conditions remain subdued," James added.

"Interestingly the last interest rate cut in October doesn’t appear to have boosted spending to the same extent as similar moves in May and June. An improvement in the global financial environment will prove vital in lifting consumer sentiment and spending in the lead up to Christmas."