Source: CSO

The volume of Irish retail sales (i.e. excluding price effects) decreased by 8.2% in November 2009 compared to November 2008, according to the CSO. There was a monthly increase of 1.1%. If Motor Trades are excluded the volume of retail sales decreased by 5.4% in November 2009 compared to November 2008 and the monthly change was +0.3%.

All sectors showed year on year volume declines with the most significant declines being:

• Motor Trades down 24.5%
• Non-Specialised Stores (includes supermarkets) down 2.1%
• Clothing Footwear and Textiles down 2.3%
• Bars down 12.0%
• Household Equipment down 10.8%

The value of retail sales decreased by 12.9% in November 2009 compared to November 2008 and there was no change in the month. However, if Motor Trades are excluded, the annual decrease was 10.6% and the monthly change was -0.3%.

Davy chief economist, Rossa White, commented:

'Core' sales stable since April but patchy; price discounting continues

Retail sales up in November

• Retail sales rose 1.1% month-on-month in volume in November and by 0.3% excluding sales at garages.
• The trend in car sales has skewed the data all year (they were desperately weak early in 2009 but recovered month-on-month seasonally adjusted from Q1). As a result, it is always better to focus on the ex-garages series for the underlying trend. This 'core' sales series has been all but flat since April 2009.
• But the stability in volumes is at the expense of price for retailers. The value of sales fell in 10 of the 11 months in 2009 for which we now have data. We do think that larger retailers had exceptionally fat margins heading into the recession, but the independent sector may well be struggling to cope. Rents were negotiated in many cases based on a revenue trend that is now unrealistic.

Patchy sales across different categories

• Even though 'core' sales have been stable overall since April, not every category has seen the bottom. Bars, department stores, books/newspapers/stationery and 'other' retail sales (which includes toys, sports clothing, jewellers and mobile phone shops) have yet to reach a floor. In contrast, sales of clothing/footwear/textiles, food, beverages and tobacco and electrical goods were off the lows of 2009 last month.

Most categories to bottom in first half of 2010

• We expect consumer spending to bottom in the first half of this year. By that point, most categories within the retail sector will no longer experience volume declines. Yet price discounting will continue for most of the year as margins return to sustainable levels.

Goodbody economist Deirdre Ryan commented:

Sales volumes up in November...

The latest retail sales numbers paint a slightly brighter picture of spending trends, with sales posting a 1.1% volume increase in November, so that the annual rate of decline slowed to -8.2% (-9.1% yoy in October), its slowest rate of decline since December ‘08. We prefer to concentrate on core spending, which excludes motor trades. On this basis, sales still managed to eke out volume growth in the month of November, albeit a more subdued rise of 0.3%.

...but will still struggle to post a quarterly increase in Q4

While retail sales data are extremely volatile on a monthly basis, these data do point to spending rebounding somewhat in November following the very weak start made to the final quarter in the previous month. Core sales volumes posted their first quarterly rise in six quarters in Q3 but spending trends will have had to improve significantly further in December if a second quarterly rise was achieved. Even for core sales volumes to have remained flat in Q4 on Q3 levels, December sales volumes will have had to increase by 2.6% mom. Given that such a large monthly increase has not been seen over the past five years of data this would appear to be an unlikely outcome.

Headwinds continue to constrain spending - The fact that retail spending is struggling to gain any momentum is hardly surprising given the cocktail of headwinds that consumers continue to face. These data do little to alter our view that spending fell by 7.5% yoy in 2009, although some modest improvement in trends in the final quarter would be welcome. In any case, consumer spending is set to decline further decline this year, where we estimate a further 2% fall in consumption for 2010.

Simon Barry. chief economist, Ulster Bank commented:

November retail sales data show an increase in both total and core (ex motor trade) volumes…

Following a weak October, the November retail sales report had a somewhat more positive feel to it. Total retail sale volumes rose by 1.1% on the month, an outcome that was buoyed by a further recovery in motor trades which were up 3.5% m/m.

The latter was the tenth consecutive monthly rise for sales in the motor trade, consistent with ongoing recovery in a sector that has taken a real battering in this downturn. Following a collapse seen in January last year, volumes have risen by a total of 32% since then, contributing importantly to an improving trend in the headline measure of total retail sales over that period.

However, this improvement needs to be seen in the context of the fact that sales were still some 25% below year-ago levels in November highlighting the ongoing difficulties facing the sector. The scrappage scheme announced in the Budget should help promote greater turnover in forecourts in the weeks and months ahead, albeit that the adverse weather conditions around the turn of the year amounted to a setback for early 2010 activity.

Encouragingly, there was also a monthly rise in sales volumes outside motor trades. Core (i.e. ex motor trades) sales volumes rose by 0.3% m/m in November, and there were also upward revisions to prior months data (the October level of sales is 0.7% higher than estimated a month ago for example).

As ever, the overall behaviour of core sales volumes masks considerable variations at a sectoral level. Areas of weakness included furniture and lighting (down 4.3% m/m) and hardware, paints and glass (down 2.5%m/m) - two sectors with clear links to a troubled housing market. Department stores were also a weak spot, falling by 3.3%. However, the report documents an 8.4% jump in electrical goods. Given that the purchase of such goods tends to be of a discretionary nature, this may be early tentative evidence of some pick-up in consumer confidence.

Spending freefall is over: Positive trend in total sales intact while core sales are stabilising

Overall, the November retail sales report is painting a picture of a much more stable Irish consumer. Taking October and November together, total sales volumes are some 1.2% higher than the average level seen in Q3. This leaves total sales on track for a third consecutive quarterly gain. This profile is heavily influenced by an ongoing recovery in the motor sector, which has seen some pick-up, albeit from truly depressed levels seen last January.

The trajectory is not quite as favourable in terms of underlying or core sales which are running about 0.9% lower than the Q3 average in October / November. Of course, the final tally for the quarter will depend importantly on what happens in December. It would take a monthly rise of about 2.5% to prevent a quarterly decline. Such a strong month would buck the recent trend, but anecdotal reports point to a relatively healthy festive season so we certainly wouldn’t rule out that kind of outcome. In any case, recent trends are clearly nowhere near as weak as in the first half of the year during which time core sales were falling by over 2.5% per quarter on average. The freefall in consumer spending looks to be behind us.