The volume of retail sales fell by 3.5 per cent in the year to July, provisional data released by the Central Statistics Office today showed.
The month-on-month improvement, the first since December last year, was almost entirely down to an increase in car sales following the introduction of a new VRT system on July 1st.
If motor trades, which include petrol and forecourt sales and have a considerable weighting on the index, are excluded, the annual decease in the volume of retail sales in the all businesses category was 5.2 per cent, the largest decline in this category since 1988. The monthly decline in this category was 1.7 per cent.
Dr Ronnie O'Toole, chief economist at National Irish Bank said the fall in the headline figure hides the true scale of decline.
"Excluding motor trades, which was impacted by the VRT reform, the volume of retail sales fell 5.2 per cent. While virtually all sectors showed a decline, semi-durable goods, such as furniture and electrical goods, showed the largest falls," he said.
The July data, which reflect the current weakness in consumer spending, were nonetheless an improvement of 2.3 per cent on the previous month when the drop was 5 per cent.
Fergal O'Brien Ibec senior economist said when the impact of car sales is stripped out retail sales were in July were "dismal".
"Retail sales excluding cars fell by 5.2 per cent in the month and sales in every single store category declined.
"Total furniture and lighting sales are now lower than they were eight years ago and the sector is clearly feeling the impact of the stalled housing market", he said.
Spending in the non-specialised stores, which includes supermarket sales, was 2.6 per cent lower last July than the same month in 2007 as inflation and economic woes curtailed consumer spending on groceries.
The largest monthly fall was in the household category, one of the most exposed to the problems in the housing market. Sales of electrical goods were down 7.3 per cent in the month and are 12.5 per cent lower in the year.
There was also a 3.5 per cent volume fall in sales of clothing, footwear, furniture and lighting in department stores, despite many retailers continuing summer sales into that month. Sales in this category are now 7.5 per cent lower than July last year.
Sales of books, newspapers and stationary declined 1.8 per cent in July and remain 10.6 per lower than 12 months ago.
Dr O'Toole said he expects consumer demand to remain weak for "some time to come, in the main because of the weakness in the labour market".
"The only positive note is that there are signs that inflation is likely to moderate, both because of the fall in the price of oil, and because retailers are having to fight to win wallet share," he added.
Ulster Bank economist Lynsey Clemenger said data from the Society of Irish Motor Industry suggested that the jump in car sales in July was short-lived and had reversed in August.
She said it was the "increasingly broad-based weakness in retail sales that has likely prompted price reductions across an array of categories, as evidenced in yesterday's CPI figures, when inflation fell from an annual rate of 4.4 per cent to 4.3 per cent", she said.
