The volume of Irish retail sales (i.e. excluding price effects) dipped by 3.1% in December 2010 when compared with December 2009 and there was a monthly decrease of 1.1% - -  December was a month of record temperature lows which impacted on retail activity in the key Christmas period.

The Central Statistics Office (CSO) said today ifIf Motor Trades are excluded, the volume of retail sales decreased by 3.6% in December 2010 when compared with December 2009, while there was a monthly decrease of 2.5%.

Motor Trades (-8.0%), Fuel (-21.7%), Furniture and Lighting (-21.5) and Bars (-9.9%) were amongst the ten categories that showed year-on-year decreases in the volume of retail of retail sales this month. Non-Specialised Stores (+2.2%), Department Stores (+5.3%) and Electrical Goods (+5.1%) were the only categories that showed year-on-year increases in the volume of retail of retail sales this month.

The value of retail sales decreased by 4.1% in December 2010 when compared with December 2009 and there was a month-on-month change of -0.9%. If Motor Trades are excluded, there was an annual decrease of 3.3% in the value of retail sales and a monthly decrease of 1.3%.

Provisional estimates are now available for the final quarter of 2010 and these figures show that the volume of retail sales decreased by 0.6% year on year in the fourth quarter, with the value decreasing by 2.1%. If Motor Trades are excluded the volume of retail sales decreased by 1.8% year on year in the final quarter of 2010 and the value of retail sales decreased by 2.4%.

Annual estimates show that the volume of retail sales increased by 0.9% in 2010 compared to 2009 and the value of retail sales decreased by 2.0% in 2010 compared to 2009. If Motor Trades are excluded, the volume of sales decreases by 1.8% in 2010 compared to 2009 and the value decreased by 4.3% in 2010 compared to 2009.

Davy Research economist, Conall MacCoille, commented:

Irish retail sales decline in December

• Today's data from the Central Statistics Office indicate that Irish retail sales declined in December – in value terms by 0.9% and in volume terms by 1.1% – compared with November
• In annual terms, this means that the value of retail sales was 4.1% below the level in December 2009 and 3.1% lower in volume terms

Poor retail sales figures indicate that the strength in the export sector is not yet translating into consumer spending

• Following positive GDP growth in Q3 of 0.5%, driven by the export sector, a key question for the Irish economy is when domestic demand may begin to stabilise
• Today's figures complete the data for the final quarter of 2010. They indicate that Q4 retail sales fell by 0.5% in both value and volume terms relative to Q3
• So, at least for now, the retail sales figures provide little evidence that Irish domestic demand is beginning to stabilise

Source: Davy Research

Retail Ireland, the IBEC group that represents the retail sector, today said that new CSO retail sales figures for December reflected the impact of the bad weather on sector. 2010 was the third year in a row that the value of core retail sales fell. The group said that the cost of running a shop had not fallen and called on landlords to reverse all rent increases under the last rent reviews and for the Joint Labour Committee to reverse its decision to increase pay rates.

Retail Ireland director Torlach Denihan said: "Core retail sales (excluding cars and bars) were poor in December and probably reduced the annual performance by 1%. The weather along with the tough Budget certainly had a major negative impact.

"While 2010 was a difficult year, however, the rate of decline in core retail sales has slowed. Sales will probably fall for some time to come but there may be some grounds to hope that the retail sector will bottom out in 2011. The big unknown is how much consumers are going to cut back in response to the impact of the budget tax changes on their pay packets.

"Last year was the third year in a row in which the value of core retail sales fell and the cumulative decline is now over 20%. However while prices have been cut to the bone, the cost of running a shop has not fallen. As over 50,000 retail jobs have been lost since the start of the recession Retail Ireland calls for landlords to reverse all rent increases under the last rent review and the Joint Labour Committee to reverse its decision to increase pay rates," concluded Denihan.

David Fitzsimons, Retail Excellence Ireland CEO said: "The CSO's retail data paints a similar picture to our own - the decline in retail sales that has affected Ireland's retail industry over the past three years continues. There is no reason to believe that this trend will come to an end. As a result we anticipate that January will see roughly 2,700 redundancies within the retail industry.

“We eagerly await the publication of proposals from Fine Gael and Labour to help domestic economic activity and the retail industry in particular.”

The main findings from REI's own Irish Retail Industry Performance Review for Q4 2010 survey include:

• Like-for-like sales declined by 3% in October, 3.7% in November and 3.7% in December
• Footwear was the strongest performing sector in the industry and the only one to record overall growth of just over 3%. This resulted from the purchase of functional footwear items suitable for the adverse weather conditions in Q4 2010
• Ladieswear was the worst performing retail sector in terms of sales, reporting an 8.64% drop compared with the same period in 2009. The Gift and Homeware sector also experienced a very challenging quarter, seeing declines of 7.43% in November and 8.12% in December
• Pharmacy, Menswear and Jewellery all saw like-for-like sales volumes decline by over 3% in Q4 2010
• Rent cost as a percentage of sales increased from a Q4 2009 level of 9.96% of sales to a rate of 10.57% in Q4 2010, indicating that even where rent reductions were given, these did not keep pace with the fall-off in sales
• Wage cost as a percentage of sales improved very slightly to 14.32% in Q4 2010, compared with 14.77% in Q4 2009
• The Average Transaction Value (ATV) continued to decline. It is now €41.67 compared with €45.29 in Q4 2009 – a fall of 8%
• Sales per square foot in Q4 2010 declined by 9% when compared to Q4 2009

Source: Goodbody

Goodbody chief economist, Dermot O'Leary, commented:

Record low temperatures and record high uncertainty undoubtedly hit retail sales in December. Trends over the coming twelve months will be influenced by underlying disposable income trends too.

Retail sales hit by weather & uncertainty in December - Unsurprisingly, retail sales were weak in December. Total sales fell by 1.1% mom, with core sales falling by a larger 2.5%. On an annual basis, retail sales volumes fell by 3.1% in December (+0.5% in November), while the pace of decline in core sales accelerated to -3.6% (from -1.0% in November). It is impossible to disentagle the two major influences on consumers in December - uncertainty around the IMF/EU deal and the weather - but there is no doubt that both impacted negatively.

Price decreases spurring demand in some categories - While most categories continue to show continuing weakness, there are some that are seeing gains. The best performing is department stores, where sales volumes were up 5.3% yoy in December. Unsurprisingly, price discounts have to be used to increase demand, but even allowing for that, the value of sales in department stores grew by 1.3% yoy. Although deflation pressures overall seem to be easing (deflator at lowest level since Q4 2008), it continues to be a problem for retailers who are struggling with fixed, and sometimes rising, rental costs.

Fall in retail sales in prospect for 2011 - Trends at the start of 2011 will determine whether the political and economic uncertainty is having more lasting impacts. However, underlying trends in disposable income are likely to have the most important impact. In 2010, retail sales overall actually increased by 1% in the full year, all due to the increase in car sales (core sales fell by 2%). At this point, a fall in retail sales of c.2% is in prospect in our view.