Consumer spending predicted to fall further

FURTHER FALLS in consumer spending have been predicted for this year after new figures confirmed that 2009 was a difficult year for retailers.

Retail sales fell 14.1 per cent last year, according to the Central Statistics Office (CSO), prompting industry group Retail Ireland to describe 2009 as “clearly the worst year experienced by the sector in living memory”. The value of the total goods sold was 18 per cent lower than in 2008, the CSO said.

There was little respite for retailers in the run-up to Christmas, with the volume of core retail sales (which exclude cars) declining almost 1 per cent compared to November in what is the peak gift-buying season.

The CSO data confirms that the sluggish sales had prompted discounting during December, with the value of core sales declining 1.5 per cent during the month.

On an annual basis, the volume of sales, including the motor trade, was 7.5 per cent lower in December 2009 than in the previous December, while the value of the sales was down 12.5 per cent.

Retail Ireland, a group affiliated to employers’ body Ibec, repeated calls for Government assistance.

“It is vital that Government assist the retail sector in every possible way to achieve comparable reductions in its cost base,” said its director Torlach Denihan.

The retail body is seeking a 10 per cent rebate on commercial rates paid in 2009 and is also seeking Government intervention in the rental market. Pressure on the industry intensified as the year progressed, he said.

“The issues from 2009 have not gone away and excessive business costs related to rent, rates, service charges and labour are still impeding overall stability in the sector,” said Retail Excellence Ireland’s David Fitzsimons.

Ulster Bank economist Lynsey Clemenger forecast a further decline of 1 per cent in consumer spending in 2010, after an expected 7.5 per cent deceleration in spending last year, while Bloxham economist Alan McQuaid said he expected spending on goods and services to fall 1.8 per cent this year.

Retail sales account for half of consumer spending, while spending on services accounts for the other 50 per cent.

Davy analyst Rossa White concurred that more pain was to come for retailers, noting that the data suggested that the overall economy did not reach a bottom at the end of 2009.

“Total sales have bottomed only because of the intra-year recovery in car sales since the total collapse in the first quarter of 2009,” he wrote in a note yesterday.

The motor trade has been one of the worst hit by declining sales volumes, recording a fall of 15.1 per cent in the year to December. However, retail weakness has been seen across all sectors.

The decision of several major traders to open on St Stephen’s Day could not salvage Christmas for department stores, which saw a near 2 per cent decline in sales volumes compared to the previous December.

Sales of food, beverages and tobacco fell almost 7 per cent over the period, indicating a leakage of sales to Northern Ireland. Spending on discretionary and big-ticket items such as furniture also endured double-digit declines during 2009, although there were signs of stability in evidence in some categories later in the year.

Attempts by retailers to entice shoppers to buy again were in evidence in the CSO’s clothing, footwear and textiles category, where sales dropped 1 per cent on an annual basis in terms of volumes, but plunged 14.1 per cent in terms of value. This reflected both heavy discounting and the decision by some retailers to pass on the effects of a weaker sterling to euro customers.