July retail sales up despite buyer caution

Retail sales picked up slightly in July, but growth was subdued as consumers continued to spend with caution.

The value of retail sales grew by 1.4 per cent over the month when compared with June, and by 4.2 per cent when compared with the same month in 2001, according to the latest figures from the Central Statistics Office.

On a volume basis, a measure which excludes price effects, the annual increase was 1.4 per cent.

Taking a three-month view, which gives a more stable indication of underlying trends, volume figures for the period from April to June show a 1.1 per cent decrease on the previous three months.

"This indicates an ongoing steady deceleration in retail spending in the economy," said Mr Jim Power, chief economist with Friends First. Mr Power believes consumer confidence is being undermined by several factors, including a sense of job insecurity and an erosion of real purchasing power through inflation.

Inflation in the Republic is running at 4.5 per cent, more than double the euro-zone average.

"There is a perception that the introduction of the euro has generated inflation. Despite some protestation to the contrary, there is solid evidence to suggest that this perception is actually reality," Mr Power said.

The largest decrease in the three-month numbers came in motor sales, which fell by 3.3 per cent. Also in sharp decline were the furniture and hardware sectors.

The most significant increase was in "other retail sales", a miscellaneous category where sales volume grew by 4.4 per cent.

Bloxham Stockbrokers chief economist, Mr Alan McQuaid, said retail sales growth was in a period of weakness as the wider economy offered consumers less reason for optimism.

"Generally, there is a greater air of despair. While sales are still growing, they're nowhere as strong as they have been," said Mr McQuaid, who expects December's budget to undermine sentiment yet further.

"I don't see it picking up that much," he said, suggesting that the Republic may have reached the natural end of a spending splurge.