Shoppers returned to the streets in September after a sluggish August, with the volume of retail sales increasing by 6.8 per cent on an annual basis.

Retail spending rose by 1.3 per cent in September compared to August, when sales fell by 1 per cent on the month and rose by just 5.2 per cent annually, according to the Central Statistics Office (CSO) retail sales index.

Economists said the growth pointed to continued resilience from Irish consumers, despite the fact that confidence in the outlook for the economy is at a four-year low.

The Small Firms Association said early indications suggested that consumer spending over the Christmas period would exceed €4.5 billion, with the hourly spend on Christmas Eve exceeding €25 million.

However retailers will need a strong pre-Christmas trading season if sales are to keep growing at the 6.9 per cent average annual rate recorded in the first three quarters of the year, Ulster Bank economist Pat McArdle said.

Mr McArdle predicted that retail sales growth in the final quarter would fail to match 2006's strong finish, resulting in annual growth of 6.5 per cent in 2007.

"This would put it only slightly ahead of last year with little sign of the boost that was expected from spending of SSIA funds," he said.

Back-to-school spending kicked in during the three month period ending in August, with the volume of sales in the books, newspapers and stationery category increasing by 2.9 per cent in June-August compared to the previous three months.

Footwear and leather sales fell the steepest, dropping 6 per cent.