New figures from the Central Statistics Office show a rise in the volume of retail sales in January, on the back of strong car sales.

The CSO said that the volume of retail sales rose by 2.3% in January compared to December with car sales growing by 6.3%. On an annual basis, retail sales rose by 8.9% - the biggest yearly rise since May 2005.

But when motor trades are excluded, the volume of retail sales fell by 1% in January from December, while there was an increase of 2.7% in the annual figures. 

Among the other sectors recording an increase in sales was the furniture and lighting sector, with sales there up 0.8%, while other retail sales rose 1.5%.

But sales in department stores fell by 4.6%, while pharmaceuticals, medical and cosmetic sales were down 4.1% and books, newspapers and stationary decreased by 3.7%.

The CSO said that the value of retail sales rose by 1.8% in January compared to the previous month, while there was an annual increase of 6.9% when compared with January 2013.

When car sales are excluded, the CSO said there was a monthly fall of 0.3% in the value of retail sales and an annual increase of 0.9%.

"Although there is still a general air of caution among consumers, there does seem to be a view that the worst is over," according to economist Alan McQuaid of Merrion Stockbrokers.

"A key issue going forward will be the state of the labour market, and the signs are encouraging on this front as we’ve seen with the most recent official employment data and the Live Register in recent months."

However, Mr McQuaid cautioned that the continued decline in disposable incomes as well as an increasing tax bill could weigh negatively on consumer spending in the coming months.

Conall Mac Coille of Davy echoed this sentiment and said that, car sales aside, much of the annual increase could be attributed to a reduction in saving.

However he said Davy anticipated a 1.5% increase in consumer spending this year, with exceptionally strong labour market data and spending on car sales potentially pushing that higher.