Bar sales slumped heading into the summer, according to the latest figures for retail sales. They show bar sales fell by a sharp 6.4 per cent in July compared to June and were running 8.1 per cent below the same month last year.

Overall retail sales were weak in July, according to yesterday's figures, falling 2.4 per cent on the previous month. The trend is generally volatile and the volume of retail sales in the month was 1.2 per cent ahead of the same month last year, with analysts still broadly optimistic that the trend is upwards.

However, the trend is definitely downwards in bar sales, confirming recent reports of dropping alcohol sales from major drinks companies such as Diageo. This appears to reflect a poor tourist season and possibly the impact of the smoking ban.

Recent inflation figures have also shown sharp increases in prices in restaurants and bars and this is likely to be affecting consumer spending in this area.

Mr Jim Power, chief economist at Friends First, said that, while the vintners will argue that declining sales are down to the smoking ban, "the most honest reality is that consumers have reacted to the rampant inflation of alcoholic drinks which was highlighted by the National Competitiveness Council earlier this week". He added that it was "little wonder" that some publicans are starting to cut prices to try to boost business.

The figures show motor trade sales running roughly in line with last year, but household-related sectors continue to benefit from the housing boom.

Sales volumes of furniture and lighting in July were running 14.2 per cent ahead of last year and the hardware, paints and glass sector was up 8.2 per cent.

"The sold housing market and the plethora of house makeover and home-improvement TV shows are clearly having an influence," commented Mr Eugene Kiernan, head of asset allocation in Irish Life Investment Managers.

While overall retail sales fell in July, economists remain reasonably optimistic about the outlook for the year.

Mr Dermot O'Leary, economist with Goodbody Stockbrokers, pointed out that, taking a three-month average from May to July, sales were running 3.4 per cent ahead of the same period last year. He is predicting a further pick-up in sales in the months ahead.

Mr Power said that consumers would remain an important contributor to overall growth, even if the State has become too expensive to expect a consumer spending spree.

Consumers are becoming more price-sensitive, he said, and "vendors... will be increasingly forced to trim prices if they want to maintain sales growth."