The latest figures from the Central Statistics Office show that the volume of retail sales fell by 6% in August compared the same time last year - the biggest fall since 1984.
The CSO says there was a monthly decrease of 2.7%.
A breakdown shows that there were sharp falls in areas linked to housing - with the hardware, paints and glass category falling more than 9% in the month and furniture and lighting sales down 2.5%. Motor sales dropped another 6.8% in the month, while bar sales were down 1.4%. Sales at department stores rose by 14.7%, however.
The value of retail sales, which takes prices into account, fell 3% in the month, giving an annual drop of 3.4%.
Ulster Bank economist Lynsey Clemenger said the motor sector, which accounts for almost a third of the index, had been expected to return to weakness after a pick-up in July. But she said the deterioration in other sector accelerated further. The economist said the impact of the recent half-point cut in interest rates was likely to be muted due to continuing bad news from financial markets and deteriorating economic prospects.
Bloxham economist Alan McQuaid said the figures were 'extremely disappointing' and suggested that economic growth this year should be even lower than current forecasts. He said he expected real consumer spending to drop 1% this year after a 6.3% rise in 2007.
NIB economist Ronnie O'Toole said there was evidence that price pressures were starting to come down rapidly in the retail sector, with implied price inflation falling from almost 4% in March to 3% in August. 'This downward trend in prices at the tills will continue into next year. This is most notable in terms of food prices which had been rising very strongly in the early part of the year,' he said.
