The consumer economy remains in decline, with retail sales still languishing and households continuing to focus on paying down debt, according to UCD’s Consumer Market Monitor.

Prof Mary Lambkin from the UCD Smurfit School said the rise in the Government’s VAT receipts could be attributed to spending on “essential items” such as fuel and transport costs, rather than discretionary spending.

The 6 per cent increase in VAT receipts in the first quarter “does not necessarily indicate a revival in retail activity”, she said.

“The Government’s austerity measures may be working in terms of correcting the overall fiscal situation, but there is no evidence of any spontaneous growth in the consumer economy,” she said

“If growth is the objective, then some stimulus will have to be provided.”

Tom Trainor, chief executive of the Marketing Institute of Ireland, which co-produced the report with the UCD Michael Smurfit Graduate Business School, said the year would remain very challenging for the retail sector.

“However, there appears to be a consensus among retailers that we are now approaching the bottom of the recessionary cycle so hopefully things may pick up in 2013,” he said, citing the entry into the Irish market of clothing chains Hollister and Abercrombie and Fitch as a sign of confidence in the future of the retail sector.