October spend rises at fastest rate in five years

Retail spending in October rose at the fastest rate in five years, boosted by a pick-up in motor trade sales. Caroline Maddenreports.

The latest figures released by the Central Statistics Office show that the volume of sales jumped 9.2 per cent in October year on year.

This is a level of growth not seen since December 2001. When compared to September, sales were 4.7 per cent stronger.

One of the main catalysts of this growth was a surge in motor trade sales (which covers car and forecourt sales), which rose by 10.3 per cent in October.

Rossa White, economist at Davy Stockbrokers, said that this surge was sparked by lower petrol prices. However, Mr White noted that retail sales growth outpaced the increase in disposable income, "even taking lower fuel prices into account".

In addition to strong motor trade sales, high street spending was another sector which fared well in October.

Consumer spending on clothing and footwear displayed growth in excess of 10 per cent.

"Should we see this level of consumer spending continue in the final run-up to the holiday season, it will cap off what has been a very buoyant year for retailers," Dermot O'Leary of Goodbody Stockbrokers commented.

Despite the slight slowing of the housing market in recent months, sales of homeware goods remained strong in October.

Furniture and lighting sales, for example, grew by almost 9 per cent year on year, while electrical goods sales soared by 14.2 per cent.

Mr O'Leary pointed out that the robust performances displayed in these categories did not extend to bar sales.

"Although bar sales grew by 2.3 per cent in the month, the annual gain is still relatively flat however, at 1.2 per cent," he said.

Ulster Bank's chief economist Pat McArdle said that, while the "October bounce" was much stronger than expected, it may be offset by a weak November figure.

Bloxham economist Alan McQuaid expects retail spending growth will end the year at 6.2 per cent, down from 6.6 per cent in 2005.

However, Mr McQuaid predicted that consumer spending would increase by 7 per cent next year, with the maturing of an estimated €16 billion in SSIA funds.

Mr White of Davy also forecast consumer spending growth of 7 per cent next year " as a result of tax cuts, higher social transfers, healthy wage income growth and increased SSIA spending".