Mounting job losses have damaged consumer confidence, according to the latest figures on retail sales, which slumped to their lowest levels since the mid 1990s.

Cooling in the motor sector led to a 2.2 per cent decline in sales by volume for the year to May, representing a 5.2 per cent decrease on the previous month.

This is most substantial fall since sales were first tracked by volume in 1995, according to the Central Statistics Office (CSO).

The value of sales, while climbing by 0.1 per cent on a year-on-year basis, fell 5.7 per cent from April, which is the sharpest monthly decline for nine years.

Car sales declined 4.1 per cent in the three months to the end of April compared to the three months to the end of January, the CSO found.

Furniture and lighting bucked the downward trend, up by 5.5 per cent in the three months to the end of April.

Mr Eugene Kiernan of Irish Life Investment Managers said that retail sales are likely to remain depressed through late summer.

This will translate into poor Exchequer returns and, in particular, lower VAT receipts, according to Mr Kiernan.

However, some analysts cautioned against reading too much into the figures.

The index climbed 1.1 per cent in volume over the first five months of 2003, Mr Robbie Kelleher of Davy Stockbrokers claimed.

Sales were likely to increase 1.5 per cent for the year as a whole, he said.

"The index is very volatile. . . the sharp falls in May follow a sharp increase in April," he said.

"It probably makes more sense to look at the average of the two months together.

"On this basis, the index has been broadly unchanged since the latter months of last year."