A brief ray of sunshine shone on overwhelmed retailers with the Australian Bureau of Statistics revealing that retail stores sales increased by 0.5 percent in July beating the predicted 0.3 rise by economists.

The release of the data prompted the Australian dollar to rise yesterday but not enough to quell fears from a battered retail sector. Retail sales have seen losses of 0.6 percent in May and 0.1 percent in June.

The July 2011 sales were better than July 2010 sales with a rise of 1.5 percent from last year. Department stores rose 1.2 percent in July with other retailing 1.9 percent; restaurant and other food services are up 1.1 percent and food retailing rising 0.8 percent. Clothing, footwear and personal accessories on the other hand fared worse with a 4.2 percent decline.

The retail figures also showed the downward trend in other states like NSW, South Australia while sales climbed in Victoria, Western Australia and Queensland.

While the slight rise may give hope to retailers, economists aren't as impressed. ANZ economists Katie Dean and Julie Toth point out that retail sales growth in July were dead flat year-on-year.

"The latest pickup in retail spending is hardly exciting, especially when you consider that over the 12 months to July annual growth in retail sales topped out at 1.4% - below the rate of inflation," Craig James, chief economist of CommSec, wrote in a research note.

"In addition, when you strip out food, retail sales fell by 0.4% over the past year - the weakest reading in almost three years."

The Australian Retailers Association declared the July figures a "disaster."

"Looking ahead to the spring season, retailers aren't expecting a break, but rather a continuation of over 18 months of dismal trading conditions," executive director Russell Zimmerman said in a statement.

"A weakening global economy is sending vibrations through the supply chain, affecting other industries such as manufacturing before filtering down to retail. Unfortunately retailers lose out as the point of contact with a consumer who is struggling with mortgage stress, utility costs and prognostics of reduced discretionary income as a result of the proposed carbon tax and regulatory change."

Retailers however, remain optimistic about the news. Chief executive of Myer Holdings, Bernie Brookes said the rise was a good sign for the next two months.

''From our perspective, we think the market is just bouncing along the bottom. The real recovery will come some time over the next 12 months, but if you knew exactly when the end would come, you'd be Albert Einstein," Brookes said in report from the Sydney Morning Herald.

''For now, we are learning to live with this new lower spending base. New taxes, the increased cost of living. All these have made it an unprecedented period of time for retail.''