Retail sales fell 0.1 per cent in February compared with the same month a year ago, the first year-on-year drop in more than four years, according to official figures published yesterday.

Volumes fell 1.9 per cent during February from the previous month, compared to no movement in January and a 0.7 per cent increase in December, the Central Statistics Office (CSO) said.

Motor vehicle sales were to blame for the year-on-year fall in February - and once these were removed, the month-on-month fall was 0.3 per cent, while sales were still up 2.3 per cent compared to the same month last year, the CSO said. However, economists pointed to weakening across other categories as an indicator that the downturn is more widespread.

Sales of electrical goods (down 6.7 per cent on the year) and furniture (up 0.2 per cent) - pointers to the housing market's health - posted their worst results for more than two years. Economists at stockbroker Goodbody noted an increase in the retail sales deflator - a measure of price increases - from 2.9 per cent in January to 4.3 per cent in February.

"While household disposable income growth is held back by lower employment growth, there is evidence that disposable income growth is being eroded through higher price levels," they said.

Bloxham chief economist Alan McQuaid said the trend for retail sales presaged a "hard landing" for the economy, personal spending growth of 2 per cent this year, and Gross Domestic Product (GDP) growth at a similar level, compared to 5.3 per cent in 2007.

The magnitude of the slowdown in spending may have been understated after it emerged yesterday that the CSO made an error in calculating the deflator since 2000.

The mistake, picked up in the CSO office in the last month, has been understating price weightings for some food items, and overstating others, resulting in an overstatement of sales volumes as food prices have risen in the last year.

The monthly change in retail sales volumes in December, the last month finalised figures were compiled, was restated yesterday to a 0.7 per cent increase from the 0.9 per cent rise previously stated.

CSO error: retail figures overstated

A MISTAKE in the compilation of the retail sales "deflator" by the CSO resulted in the yearly change being overstated by 20 per cent in December.

The error, which dates back to the compilation of the deflator in the index's base year, 2000, meant the year-on-year rise in December was shown as 4.4 per cent when it should have been only 3.5 per cent.

The deflator adjusts sales by value for changes in retail prices to give the sales volume figure, a more accurate indicator of sentiment.

CSO statistician Patrick Foley said: "Because food price rises have become an issue over the last part of last year, the divergence had become more pronounced in the most recent figures. It was not an issue for the most part of the series [dating back to 2000]."