A pull-back in one particular spending habit is concerning economists

Australia's benchmark share index flirted with an all-time high on Tuesday, but it wasn't to be.

The S&P/ASX200 is yet to surpass its record close of 7,628 reached in August 2021.

The forces pulling the market up however, analysts say, remain strong.

Those forces include expectations the Reserve Bank will cut interest rates this year and hopes for a solid mid-year corporate reporting season.

"Markets will regularly trade at record highs," Forager chief investment officer Steve Johnson told The Business.

"Companies grow, they keep their earnings, they invest those earnings and grow further.

"Our market here is trading at a perfectly sensible multiple."

Investors use earnings multiples to judge how expensive a stock price is relative to how much money the company is making.

"It [the share market as a whole] has returned around 8 per cent per annum over the past 15 years," Mr Johnson said.

"I think it is priced to deliver you something pretty consistent [with that] in the future.

"Is that all going to come in 2024? I have absolutely no idea."

The past month has seen the share market push towards a new all-time high twice.

Late in December, it hit the closing high intra-day, or during the day, and then pulled back.

A similar scenario played out on Tuesday.

Noteworthy on Tuesday though was the timing of the intra-day pull-back – it occurred moments after the release of the Australian Bureau of Statistics (ABS) December retail sales figures (published at 11:30am AEDT).

The data showed retail sales for the month fell to a seasonally adjusted 2.7 per cent (month-on-month).

"The large fall in retail turnover in December was caused by a fall in discretionary spending.

"Consumers brought forward some of their usual December spending to November to take advantage of Black Friday sales," ABS head of retail statistics Ben Dorber said.

While it's clear many thrifty shoppers saw the need to hunt for Christmas gift bargains in November, the ABS also noted that overall spending has been subdued.

"While there was a large seasonally adjusted fall in December, retail turnover rose 0.1 per cent in trend terms," Mr Dorber said.

"This shows that underlying retail spending remains subdued when we look through the volatile movements over recent months in the lead-up to Christmas."

Indeed the Commonwealth Bank published a note on Tuesday indicating retail stocks could be a drag on the share market in the coming months.

"With the Aussie corporate reporting season almost underway, it is worth noting that the consumer spending outlook for ASX-listed retailers remains challenging," the CBA said.

"And the household income boost from tax cuts could be largely offset by higher savings as the labour market cools."

The labour market "cooling" is another way of flagging the risk of rising unemployment.

It's a risk, say economists, because the slump in retail sales has become broad-based, and that points to a weakening economy.

"Retail turnover fell across all categories except for food in the month," AMP's chief economist Shane Oliver said.

"While the monthly fall was mainly driven by a reversal of Black Friday sales in discretionary spending — in household goods, clothing and department stores, on a quarterly basis households have cut back spending the most in clothing (-1.6% qoq) and dining out & takeaway (-1.2%qoq).

There's a possibility the consumer will further tighten their purse strings in coming months.

"It is likely retail sales will remain weak in the months ahead in response to ongoing cost-of-living pressures.

"In fact, the noisy data over the past few months has partly reflected the growing trend of consumers seeking out bargains and discounts which is a sign of weakness in household consumption.

"Overall, lower consumer demand will help keep firms from raising prices and thus help inflation to moderate further," Dr Oliver said.

Strengthening the case that consumer spending has deteriorated markedly is the reduced turnover going through cafes and restaurants.

There's no Black Friday for this industry, which means diners cannot carry their spending forward.

"Of further concern is the continuing fall in expenditure at cafes, restaurants and takeaway food services," CreditorWatch chief economist Anneke Thompson said.

"Expenditure in this area is up only 1.6 per cent year on year, despite very strong population and pricing growth."

We will get a further read on the strength of demand in the economy on Wednesday with the release of the monthly and quarterly ABS inflation or CPI figures.

Over the 12 months to the September 2023 quarter, the CPI rose 5.4 per cent.

The Reserve Bank will closely examine the December quarter figures for further signs inflation is cooling.

Key to the outlook for interest rates will be if the RBA sees fit to change its inflation forecasts based on Wednesday's data set.

If you're unable to load the form, click here.