Retail sales growth in June continued to be modest with spending on motor vehicles slowing and consumers opting to save more as unemployment nudged higher and the special savings incentive scheme affected spending.

The value of sales rose by 2.4 per cent in June compared with the same month last year but fell by 1.4 per cent on May 2002, according to the latest data released by the Central Statistics Office (CSO). In the three months to May 31st, sales were down by 3.2 per cent on the same period a year earlier.

Motor trades are running at more than 6 per cent below the volume seen last year and when that section of spending is stripped out of the figures, the rise in sales in June compared with the same month last year was 6.4 per cent.

The CSO figures also show that, for the three-month period ending June 30th, which gives a more stable indication of underlying trends, sales volume was down by 1 per cent when compared with the preceding three-month period ended March 2002.

Dr Dan McLaughlin, chief economist at Bank of Ireland, described the latest data as "soft". He said the figures showed people were now saving more. "Unemployment is nudging higher, even if it is not growing hugely, and when that happens people become a bit more cautious. Some are maybe worried about losing their jobs and, as a result, they would tend to save more," he said.

He added the Government's special savings incentive scheme had also probably taken some money out of retail spending. "We know that the take-up of that scheme was phenomenal and, while we have no way of knowing how much money was simply taken out of other bank accounts and put into the scheme, I suspect it has resulted in people saving more and spending less than they did last year."

Mr Jim Power, chief economist at Friends First, said spending promised to remain depressed in coming months as the cost of living continued to rise and consumers faced the prospect of no tax cuts and lower wage increases.

"[The figures] confirm anecdotal evidence that the Irish consumer has been retrenching strongly in recent months and there is worse to come," he said.

The June figures are a marked departure from recent years. In 1999, annual sales grew by 11.4 per cent and in 2000 by 16.3 per cent. Sales slowed dramatically last year when they rose by just 5.9 per cent.

In three of the first six months of the year, sales were down. January saw a fall of 4.7 per cent from December of 2001, March saw a 4.8 per cent slump compared with February and June has dropped by 1.4 per cent compared with May.