Volume of retail sales falls by 5.2%

The volume of retail sales fell by 5.2 per cent in the year to June, the biggest annual decline since January 1987, provisional data released today by the Central Statistics Office showed.

The decline, which reflects the current weakness in consumer spending, was driven in large part by a 14.2 per cent annual drop in motor trades, which includes petrol and forecourt sales, and a weak 0.5 per cent increase in the non-specialised stores sector, which accounts for supermarket sales.

There was also an 18.6 per cent annual fall in furniture and lighting sales, a 10.6 per cent decline in sales of electrical goods and a 10.3 per cent drop in the sector covering books, newspapers and stationery sales.

The data shows that for the three-month period between March and May of this year retail sales fell in all sectors of the economy when compared with the previous quarter.

However, although the June figure represents the fifth consecutive monthly drop, the rate of decline appears to have eased somewhat when compared with the steep changes recorded in the first four months of 2008.

The CSO figures show that if motor trades are excluded there was an annual decrease of 1.8 per cent and the monthly change was -1.9 per cent.

Alan McQuaid, chief economist at Bloxham Stockbrokers, said a number of factors were contributing to the weak trend in consumer spending this year.

“Disposable income growth has been eroded by high consumer price inflation and the emergence of weakness in the labour market, mainly emanating from declining construction employment, but also reflecting a more generalised weakness in labour demand," he said.

Mr McQuaid said the figures suggested the economy would in the second quarter post negative growth even greater than the figure of 1.5 per cent recorded in the opening quarter.

“The bottom line is that the Irish economic picture continues to deteriorate, and with consumers clearly retrenching we strongly believe that the Government should be looking at providing fiscal stimulus (tax cuts) in the December Budget to alleviate the pain on the hard-pressed personal sector,” he said.

Chief economist with National Irish Bank Dr Ronnie O'Toole said: “What is clear from the figures is that the consumer strike that began in April has continued.”

However, he said there may be some relief for the remainder of the year, as purchasing power is boosted by a more subdued price environment.

Employers’ group Ibec said sectors related to housing continue to be especially badly hit, with large annual declines recorded in the sales of electrical goods and furniture and lighting.

Ibec economist Reetta Suonperä said: “Given the uncertain economic climate, people are naturally becoming more cautious, postponing any discretionary large-scale purchases.”

Ulster Bank economist Lynsey Clemenger said the figures added to an already dismal week for Irish economic data, when seen in combination of a marked deterioration in the labour market and weak external trade figures.

Ms Clemenger said: “Against the backdrop of a deteriorating labour market and a weakening general economy, in addition to the numerous drains on household incomes, we are likely to observe weakness in retail sales, and consumer spending in general, for some time to come.”