Retail sales bounce in December

Hard-pressed retailers got a boost in December as the volume of retail sales rose by more than 2 per cent over the month.

But retail groups warned the industry was still facing significant job losses as retailers were forced to close stores, and called for Government action to help alleviate the problem.

Department stores saw some of the benefit of December's increase, with sales there rising by 8.1 per cent over the month. Sales at bars were lifted by 2.7 per cent compared with November.

However, furniture and lighting sales continued to suffer, falling by 5.6 per cent, while food, drink and tobacco in specialised stores saw volume drop by 3.2 per cent.

Year-on-year, sales for December were 3 per cent higher, but industry figures noted the harsh weather in 2010  affected sales figures that month.

The volatile motor industry accounted for the bulk of the change, with sales in the sector rising by just over 26 per cent month-on-month. When the motor trade was excluded, sales were only 0.2 per cent higher compared with November 2011, and 0.6 per cent compared with a year earlier.

The value of retail sales was 2.9 per cent higher month on month, and 3.4 per cent compared with December 2011. When the motor trade is excluded that rise is reversed to a 0.1 per cent decline for the month. Over the year the value of retail sales 1 per cent up on 2010.

The figures were slightly better than expected. Figures from industry body Retail Excellence Ireland, released earlier this week, had estimated a rise of 1.8 per cent in the volume of sales for the month.

Analhysts said although last year’s poor weather made it difficult to identify trends, the sharp fall in retail sales appeared to have slowed.

“Given the difficulty in comparing annual trends, comparing changes over a two-year period may be more appropriate,” said Goodbody chief economist Dermot O’Leary.

“On this basis, core sales volumes were down by 1.7 per cent in December 2011 relative to December 2009, indicating that the retail environment still remains quite depressed, albeit the rate of decline is slower than witnessed earlier in 2011.”

Goodbody is predicting a 3 per cent decline in retail sales for this year, as falling employment and higher sales tax holds back any significant improvement.

Bloxham chief economist Alan McQuaid said the approaching 2 per cent VAT hike - which came into force on January 1st -  may have prompted some consumers to shop early.

“Overall, there is little to be optimistic about as regards the Irish consumer or personal spending in the immediate future,” he said.

“The VAT hike is going to do little for consumer spending in 2012. Indeed, Retail Excellence Ireland has warned that the Government’s projected tax take on VAT this year is likely to fall substantially below target, possibly by 10 per cent or more.”

While REI welcomed the jump in sales, the group also warned of a challenging year ahead for retailers, with low consumer confidence set to continue and the added pressure the VAT hike.

"Large numbers of indigenous and international retailers will continue to close their stores each week and large scale retail industry job losses will continue," said REI chief executive David Fitzsimons.

"If the Government and local authorities are serious about protecting the remaining 250,000 retail jobs, they need to take meaningful action, starting with commercial rates."

Small business group Isme said the slight increase could not mask the "dreadful" business environment facing retailers, and called for the Government to introduce the promised strategy group.

"It is no exaggeration to state that the retail sector is facing an armageddon-type situation unless serious action is taken to address business concerns including the cost of rates, wages, rents and energy, which continue to suffocate the sector," said chief executive Mark Fielding.