RETAIL sales continued their slide during June with volumes falling by about two per cent, according to the Government. Grim retailers said a predicted mid-year bounce in sales failed to materialise and they expected the situation to remain depressed for the rest of the year. The Hong Kong Retailers Association said a two or three per cent cut in interest rates was needed to kick-start consumer demand. They said the downturn - which began about 12 months ago - was forcing landlords to cut rents to retain chain-store leases. The Census and Statistics Department yesterday announced that the overall volume of goods sold fell by two per cent in June compared with the same month last year. The value of sales rose four per cent to $16.5 billion, but this was boosted partly by the territory's inflation rate, presently at about nine per cent. Joanne Yim, manager of economic research at the Hang Seng Bank, said: 'With unemployment remaining high I do not think retail sales will improve in the near term.' Ms Yim supported retailers' claims that a big cut in interest rates was necessary to boost demand. She said: '[The rate cut] would have to be pretty hefty. Consumer sentiment is bleak and it would take a lot to reverse that trend.' She added that bleak sentiment was causing many to ignore strong recent economic performance in the trade sector. Rodney Miles, chairman of the Retail Management Association, said: 'It is currently very bad and it is getting worse. The market is in the doldrums. 'It has now been heading down since May 1994 but the trend seems to be accelerating.' He said a two to three per cent cut in interest rates and a turn-around in stock and property markets were needed to revive demand. But he said that 'rents are dropping like a stone' as landlords were given ultimatums by tenants of dropping leases unless they were renegotiated. Some sectors, such as those specialising in tourist demand, have maintained buoyant sales. Patrick Chu, chairman of the Association of Retailers and Tourism Services, said: 'The tourist retail situation continues to look rosy. 'In particular, Taiwanese, Japanese and South Koreans continue to spend in June and July and our members are seeing some satisfactory growth in their turnover.' A Government spokesman blamed the decline in sales volume on plummeting car sales which were down 34 per cent in value and 40 per cent in volume. Luxury items usually are the first to be sacrificed in periods of economic contraction. The car industry also has been hit by the rising cost of imports, resulting from the fall in the value of the dollar against the United States dollar and the yen, and concerns about proposed Government moves to curb the use of vehicles. Sales of other consumer durable goods also fell six per cent in value and 10 per cent in volume. Food, alcohol and tobacco sales were down by one per cent in volume while department store sales' volumes dropped by six per cent.