EMBATTLED CONSUMERS are ditching their spending habits, with the volume of retail sales now collapsing at the sharpest rate since 1987, according to new figures from the Central Statistics Office (CSO). Laura Slatteryreports.

Poor sales of such big-ticket items as cars, furniture and other goods relating to the troubled property market led to a 4.8 per cent annual fall in the volume of retail sales in May - the biggest decline in 21 years.

The release of the gloomy sales figures by the CSO coincided with a pronouncement by Friends First economist Jim Power that Irish consumers are "spent", "going into hibernation" and thus unwilling to propel the Irish economy forward.

Danny McCoy, director of policy at business group Ibec, said the sharp fall in spending was "a grim reminder that consumer sentiment is at its weakest since records began".

Furniture and lighting sales have been decimated by the housing market crash and are down 11 per cent year-on-year, while sales of electrical goods have plunged 14 per cent.

In the three months from February to April, clothes sales are down 4 per cent on the same period in 2007, while footwear sales are down almost 10 per cent.

Car sales dropped 8 per cent in May compared with May 2007 and have been sluggish all year. The motor industry had been hoping for a bounce in sales both before and after changes in motor tax rules at the end of June.

Momentum in retail spending is likely to weaken further over the coming months, given the 50 per cent year-on-year drop in new car registrations in June, according to Deirdre Ryan, economist at Goodbody Stockbrokers.

However, Alan McQuaid, economist at stockbrokers Bloxham, pointed to an "encouraging" pick-up in car sales in early July, suggesting that many car buyers were waiting for the new motor tax changes to kick in before buying a new car.

But Mr McQuaid described the overall retail sales data for the first five months of the year as "extremely disappointing".

Sales of hardware, paints and glass, although still increasing, have slowed to 4.3 per cent in the three months to May, down from double-digit rates of increase, suggesting that the repair, maintenance and improvement sector has not stayed immune from the housing slowdown, Ms Ryan noted.

"With the economic backdrop continuing to deteriorate, and in particular labour market trends worsening, it is no surprise that the consumer has little appetite for spending at present," Ms Ryan said.