Figures from the Central Statistics Office show a pick-up in consumer spending in December, with the volume of retail sales up 3% compared with December 2010.
This was the biggest annual increase since January. Sales were also up 2.1% compared with November.
The CSO figures are adjusted to take seasonal factors, such as Christmas shopping, into account, but economists had been expecting a sales boost last month due to consumers bringing forward some buys ahead of a VAT rise in January.
The CSO figures also show that sales excluding the motor sector, which are closely watched by economists, were up 0.6% over the year, the first such increase since October 2010.
A breakdown of the figures showed that sales at department stores jumped by 8.1% from November, while bar sales were up 2.7%.
Sales in the motor sector - which also includes services and parts as well as car sales - jumped by 26.3% during December, though this is from a low level - meaning that even very small increases in volume can lead to big percentage changes.
Provisional figures for the whole of 2011 show that the volume of retail sales fell by 0.9% from 2010.
The value of retail sales, which takes prices into account, rose by 2.9% in the month and 3.4% over the year.
Economists point to weather factor
Bloxham economist Alan McQuaid said the figures suggested some underlying improvement in sales, but added that the severe weather last year would have been a factor in the annual comparison.
Goodbody economist Dermot O'Leary also pointed to the difficulty in identifying trends due to the weather factor. He pointed out that sales were down 1.7% compared with December 2009, indicating that the retail environment "remains quite depressed".
Retail Excellence Ireland called the figures "encouraging", but warned that 2012 would be another tough year for retailers.
IBEC group Retail Ireland gave the figures a guarded welcome, but said that overall 2011 was still the fourth consecutive year of falling sales, pointing to the continued challenges faced by retailers.
Dublin BID calls for VAT decision to be reconsidered
The Dublin City Business Improvement District (BID) today welcomed today's retail sales figures. Their figures show that footfall in Dublin city centre in December was up 8.5% on 2010, almost reaching the levels last seen in 2009.
But Richard Guiney, CEO of Dublin City BID, said that it is important to note the effect of a strong performance in certain sectors - namely the motor trade - which have had the effect of skewing the overall picture somewhat.
Mr Guiney said that feedback from the group's members suggests that sales exceeded expectations for the Christmas period and that this was across both the retail and leisure sectors.
But he said there is more to be done to stimulate consumer confidence and get people spending again.
''We would urge the Government to review the VAT increase at the first available opportunity - we need Government action to protect and grow these sales and footfall figures and to protect jobs,'' he said.
He also called on the Government to bring forward the 2012 Budget to mid-November.