RETAIL sales slowed sharply in July, according to the latest figures form the Central Statistics Office.

The fall will be a relief to the Central Bank which was worried that runaway sales in the shops - could feed through to inflation.

Sales in July fell by a provisionally adjusted 0.7 per cent, giving a yearly increase of 7.4 per cent.

The CSO also revised the June figures. According to the new figures, retail sales were down 0.4 per cent on the month and up 11.7 per cent for the year.

Sales of electrical goods were extremely buoyant with the sector registering a 9 per cent increase in the three months from March to June this year.

The largest decrease in the volume of business over this period and in public houses, which saw sales falling by 2.2 per cent.

The slowdown in consumer spending could also lead to downward pressure on interest rates, although analysts stressed that the credit figures, due out next Thursday, will give a better idea of overall consumer demand.

The index is calculated excluding sales at garages and filling stations because irregular sales can distort the overall index. Sales at these outlets were up 17.9 per cent on the year.

The drapery and apparel sector - saw the highest rise in July with an increase of 14.3 per cent on the previous month.

On a three month basis, which gives a more stable indication of recent trends, the seasonally adjusted level of retail sales in May to July 1996 is estimated to have been 0.4 per cent higher in value than in February to April and 10 per cent higher than in the same period in 1995.

Mr Han de Jong, chief economist at Goodbody Stockbrokers, said last month's rise of close to 12 per cent rise was a little out of kilter. "It should really be around 8 or 9 per cent in nominal terms," he said.

"The Central Bank will breathe a sigh of relief at these figures. If sales were at 12 per cent the Bank would be worried that inflation could get out of control."

He added that he expects sales in August to remain around the same level or even fall a little. "The Society of the Irish Motor Industry (SIMI) figures were not particularly strong for August," he said. "Car sales were only up 2.8 per cent, probably because the scrapping scheme started in July last year, so retail sales could even be down a touch."