Retail sales volumes surged by 9.9 per cent in May compared to May 2006, according to the latest figures from the CSO. There was a monthly rise of 1.4 per cent from April.

If motor trades are excluded, the annual increase was 9.1 per cent and the monthly change was 2.2 per cent. By value, retail sales rose by 10.6 per cent in May 2007 compared to the previous May and by 1.5 per cent in the month.

Goodbody Stockbrokers chief economist Dermot O'Leary said the figures suggested consumers were weathering interest rate increases and the slowing housing market exceptionally well. "On the more reliable three-month moving average, the volume of sales grew by 8.1 per cent year on year, up from 7.1 per cent in the previous three months, and its highest rate of growth since December 2000," he said. The maturing of €7.4 billion in SSIA funds in March and April brought a significant positive wealth effect for consumers, he said. "We expect consumer spending growth to contribute strongly in the second and third quarter before slowing somewhat towards the end of the year and into 2008, he added.

Ibec said the retail sector remained buoyant and looked set to make a significant contribution to economic growth in 2007. "The retail sector remains exceptionally strong at present and the SSIA impact is evident in a number of areas," said Ibec senior economist Fergal O'Brien.

"Given that about half of the SSIA accounts matured at the end of April it would have been a major surprise if we hadn't seen a bounce to the retail figures in May."