Christmas retail sales weaken

Consumer spending continued to weaken in December as severe weather curtailed shoppers and contributed to the volume of sales falling 1.1 per cent compared to the previous month.

Excluding the motor trade, which was boosted by the car scrappage scheme, the volume of retail sales decreased by 3.6 per cent year on year, and the monthly fall widened to 2.5 per cent.

Furniture retailers were among the hardest hit, with the volume of sales in this sector dipping 8 per cent. Sales of fuel declined 14 per cent, with analysts pointing to the severe snow and ice last month that encouraged motorists to cut the volume of journeys.

Analysts also speculated that the economic uncertainty in December also affected consumers and their shopping habits.

"It is impossible to disentagle the two major influences on consumers in December - uncertainty around the IMF/EU deal and the weather - but there is no doubt that both impacted negatively," said Goodbody's chief economist Dermot O'Leary.

The value of sales also declined, falling by 4.1 per cent over the year to December.

On a month-on-month basis the value declined 0.9 per cent. Taking the motor trade out the equation, there was an annual decline of 3.3 per cent in the value of retail sales, while the monthly decrease was 1.3 per cent.

"Poor retail sales figures indicate that the strength in the export sector is not yet translating into consumer spending," said Davy analyst Conall MacCoille. "A key question for the Irish economy is when domestic demand may begin to stabilise."

Data for the final quarter of last year indicates retail sales fell by 0.5 per cent in both value and volume terms in the fourth quarter, compared to a year earlier.

Retail Excellence Ireland said the figures showed the severity of the decline in retail. "There is no reason to believe that this trend will come to an end. As a result we anticipate that January will see roughly 2,700 redundancies within the retail industry," said REI chief executive David Fitzsimons.

National Irish Bank’s chief economist Dr Ronnie O’Toole also predicted another difficult year ahead for retailers.

“Sales in January will probably show a one-off improvement on December as the harsh weather subsides, though 2011 as a whole is likely to be another difficult year,” he said.

“Consumer sentiment has fallen since the outbreak of the debt crisis after almost two years of gradual, if unspectacular, improvement. Consumer spending is likely to decline by 2 per cent in 2011 though this will start to improve in 2012 as households very elevated rate of precautionary savings starts to edge downwards.”