Photo: Saaed Khan/ AFP/ Getty Images.

Australian retail sales beat expectations for a third consecutive month in October, an encouraging sign for the economy heading into Christmas.

According to the ABS, nominal retail sales rose by 0.5% to $25.62 billion in seasonally adjusted terms, the highest monthly total on record.

Economists were expecting sales to lift by a 0.3%, following a 0.6% increase in September.

Despite the strong lift in October, the annual pace of growth slowed fractionally to 3.5%. However, perhaps more reflective of recent strength, sales over the past three months are now running at an annual pace of 6.8%.

Non-food sales rose by 1.0% to $15.35 billion, leaving the year-on-year increase at 4.0%. Food sales, the largest category by dollar spend, increased by 0.56% to $10.27 billion, up 2.7% on the levels of a year earlier.

According to the ABS, sales increased for food (0.6%), household goods (0.7%), other stores (0.8%) and in cafes, restaurants and takeaway food services (0.4%), more than offsetting declines of 0.4% apiece for clothing, footwear and personal accessories and in department stores.

Food sales account for around 40% of total retail sales.

Over the past 12 months, sale in cafes, restaurants and takeaway food services recorded the fastest increase of any category at 7.3%. Department stores, at -4.0%, was the only category to record a decline in sales over the past year.

By state and territory, sales increased in Queensland (0.8%), Victoria (0.5%), New South Wales (0.3%), Western Australia (0.4%), the Australian Capital Territory (0.9%), Tasmania (0.6%) and the Northern Territory (0.3%).

South Australia, at -0.1%, was the only state to record a decline in sales. The fall may have be due to weather-related disruptions in late September, something that took the its entire electricity grid down for nearly a day.

Over the past year, sales increased in all states and territories, led by the ACT with an increase of 8.3%. As has been the case for some time, non-mining states and territories continue to outperform those more aligned with the fortunes of the mining industry.

Despite the strong October report, there has been no market reaction to the data.

The ASX 200 is currently trading down 0.4% at 5479 while the AUD/USD sits at .7418, up 0.05% for the session (and lower than where it was prior to the release).

Australian bond futures are trading softer (yields higher), but that is more than likely due to the selloff in global bonds seen overnight.

Australian 3 and 10-year bond futures are down 5 and 9 ticks respectively.

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