Surge in retail sales signals new strength in economy - CSO

Last year saw the biggest growth in retail sales in four years, signalling a fresh upturn in the economy, according to the latest report from the Central Statistics Office (CSO).

Retail sales grew by 3 per cent in 2004, compared to 0.9 per cent in 2003, and just 0.1 per cent in 2002.

The last time total sales rose by as much as 3 per cent was in 2000 when the economy was slowing down after a boom in consumer spending in the 1990s.

The CSO figures show the volume of retail sales rose by 3.5 per cent between December 2004 and December 2003 - a higher increase than had been expected by industry observers.

There was a drop in bar sales, however, of 6.7 per cent, a decline fuelled by surprisingly poor pre-Christmas returns.

The volume of bar sales fell by 3.9 per cent in December compared to the previous month, a possible result of the major Garda clampdown on drink-driving over the Christmas and New Year period.

In contrast, bar sales rose by 1.8 per cent between November and December 2003.

Philip O'Sullivan, economist with Goodbody Stockbrokers, said the smoking ban appeared to have had "an accelerating effect on the decline in sales" in what was "a torrid year" for publicans.

However, he said, the downward trend had been "in train for a significant period of time" before the ban's introduction last March. "This is most likely due to the excessive price increases in the industry leading to a shift in consumer preferences to other areas."

Aebhric McGibney, director of policy at the Dublin Chamber of Commerce, agreed, saying "people in the hotel and catering industry are beginning to re-evaluate their propositions to make them more attractive to consumers. Price is certainly a deterrent at present."

A CSO spokesman pointed out that off-licence sales have also been falling recently, contributing to a 7 per cent drop in food, beverage and tobacco sales between November and December last.

Responding to the CSO release, Davy Stockbrokers said recent signals suggested consumer spending was accelerating. The company added: "We expect the positive trend to continue on the back of accelerating real wage growth. Our latest forecast envisages growth of 4 per cent in consumer spending in 2005."

The CSO Retail Sales Index also found that Ireland was outperforming all other member states in the euro zone for retail trade. The volume of trade was up by 6 per cent last November compared to 5.1 per cent in Austria, and a euro-zone average of 0.2 per cent.

Within the EU 25, only Latvia, Estonia, Denmark, Lithuania, and Sweden showed higher retail trade growth last November.