Irish retail sales fell by1.6 per cent in the last three months of the year, a new report from Retail Excellence Ireland said today.

The quarterly figures showed that sales fell by more than 6 per cent in October and just over 0.65 per cent in November, before rising by 1.8 per cent in December, compared with figures from a year earlier.

The increase recorded in December was the first since March 2008, but the report also noted that the improvement could be attributed to record snowfalls last year.

"Quarter four 2011 proved to be a challenging period for the Irish retail industry due primarily to significantly weakened consumer sentiment,'' chief executive David Fitzsimons said in a statement. "Such erosion was caused by the growing euro zone crisis and the repeated negative commentary regarding domestic austerity measures."

The worst performing categories were furniture and flooring, which fell by 5.7 per cent as the property market continued to stagnate, and jewellery, which was 4.8 per cent lower compared with the fourth quarter of 2010 as consumers moved away from gold purchases and chose more conservative gifts.

At the more positive end of the market were garden centres, with sales increasing by 4.75 per cent in sales, and menswear, which got a 1.8 per cent boost year on year.

Retailers are still struggling to cut costs, with wages as a percentage of sales at 16.63 per cent for the quarter, almost 1 per cent higher than in the same period in 2010.

Average transaction value was lower too, falling by an average of 4.9 per cent across all retail sectors as competition pushed prices lower.