The level of retail sales continues to fall from the high levels reached in January and the annual rate of growth in the sector continues to slow, data from the Central Statistics Office (CSO) revealed yesterday. Analysts yesterday blamed rising inflation and higher interest rates for the slowdown.

Retail sales volumes - the value of sales adjusted for price changes - fell by 0.4 per cent in March compared to February. Excluding motor sales, volumes fell by 1.8 per cent month-on-month.

But sales remained significantly higher than a year ago, recording a 5.3 per cent rise on March 2005, compared with annual growth of 6.1 per cent in February and 8.8 per cent in January. The strength of the month-on-month falls in clothing, footwear and household equipment sales suggest consumers moderating their purchasing behaviour.

Despite the slowdown, March's retail sales performance was far stronger than across the euro zone. Most recent data shows sales volumes rose by 1.4 per cent in February in the euro zone.

"The SSIA-induced spending splurge has tailed off since January. The blame for this lies with the recent spike in inflation and higher mortgage repayments," Rossa White of Davy stockbrokers said yesterday.

But Ulster Bank chief economist Pat McArdle said that SSIAs had had little impact on the early year retail performance. "The people who invested early in SSIAs were the higher income ones - they are less likely to blow the proceeds," he said yesterday.

Alan McQuaid of Bloxham stockbrokers predicted a modest pick up in the rate of growth later on this year. "We are looking for a real increase in spending this year of around 6 per cent. This rate of increase is likely to exceed the rise in disposable income, resulting in a reduction in the savings rate from its current reasonably high level."