|Soource: CSO |
The CSO said today that the volume of Irish retail sales (i.e. excluding price effects) decreased by 3.2% in April 2008 compared to April 2007. There was a monthly decrease of 0.9%. If Motor Trades are excluded there was an annual decrease of 2.9% and the monthly change was –3.1%.
The value of retail sales increased by 0.1% in April 2008 compared to April 2007 and decreased by 0.9% in the month. However, if Motor Trades are excluded, the annual increase was 0.7% and the monthly change was –3.1%.
March 2008 is the latest month for which final detailed figures are available.
The three-month January 2008 – March 2008 volume figures show that, compared with the three months ending December 2007:
The largest increase in the volume of sales was in the Hardware, Paints And Glass (+3.4%) sector.
The largest decrease in the volume of sales was in the Electrical Goods (-4.9%) sector.
All figures are trading day and seasonally adjusted. The seasonal factors are based on unadjusted indices up to February 2008.
Rossa White, economist at Davy Stockbrokers says spending is falling across all categories as cash flow is squeezed:
Irish retail sales fell for a third straight month in April
Sales dropped by 0.9% in volume in April compared with March. That meant sales were 3.2% lower in April than in the same (SSIA-fuelled) month of 2007.
The value of sales was barely up either. Retailers have been attempting, with limited success, to pass through higher prices due to increased input costs. The cash value of sales rose only 0.1% in the year to April.
Household spending is being hit by dwindling cash flow as the labour market weakens and food and energy costs jump. In today's CPI data, food prices rose by 7.8% and energy prices by 9.2% year-on-year (yoy) in May.
On top of that, credit is increasingly hard to come by.
Sales now declining across all categories
We cannot blame the drop in retail sales solely on the government's mis-timed car tax (road tax and VRT) changes. Retail sales are declining across the board.
Housing-related areas are suffering: electrical goods down 6% yoy; furniture and lighting -2.6%; and hardware, paints and glass (DIY sales) -13.6%.
Elsewhere, clothing dropped 11.2% compared with April 2007 and footwear and leather dived 20.1%.
Our revised consumer spending forecast looks optimistic
We recently revised our consumer spending forecast for Ireland to 1% volume growth for 2008. Note that retail accounts for only half of spending, and we assume that spending on services holds up better. However, after last week's ECB news and these data, that forecast is a best case scenario.
Lynsey Clemenger Economist, Ulster Bank commented: Continued weakness in retail sales of little comfort
Retail sales volumes fell for the third consecutive month in April, decreasing by 0.9% from April, and dragging the annual rate further into negative territory at -3.2% (-2.0% in March).
While some may take comfort from the fact that the monthly decline in April was below 1.7% drop in March, a less negative (or even a modest positive) number was expected, given that the early timing of Easter reduced the number of trading days in March and therefore likely exaggerated the decline in sales last month.
The sharp fall-off in retail sales in recent months can be attributed to a combination of factors. Firstly, the deterioration in the Irish labour market as evidenced in the first quarter QNHS figures and the Live Register data, has worked to dampen consumer spending. Secondly, the stubbornly high inflation, has limited the spending power of households.
These factors, in addition to negative news on the domestic and international economies, continue to depress consumer sentiment, which is also feeding through to reduced sales volumes.
Following a weak month on March (-4.3% m/m), sales in Motor Trades actually increased in April, up 3.6% on last month. However, in annual terms the rate of change remained in the red, albeit that the rate of decline of 3.6% was less than the 8.6% decrease in March.
Whilst Motor Trades did not contribute to the monthly decline in April, the majority of other categories worked to depress the overall retail sales figure. Last month, we noted that the weakness in retail sales was spreading beyond the beleaguered Motor Trade category, an assertion that was further confirmed in the April figures.
Retail sectors linked to housing continued to perform poorly, indicative of the fall-off in completions in recent months. Total sales of Household Equipment fell by 3.4% in the month, driven by the 7.6% decline in the Hardware, Paints and Glass component. In annual terms the situation is even bleaker, with total Household Equipment down 9.9%. Indeed, the poor outlook for construction activity means weakness in this sector is set to continue in coming months.
Sales in Food Businesses fell by 3.1% on a monthly basis, turning the annual rate of change negative (-0.7%) for the first time since July 2003. Bars also continued on their losing streak, falling by 2.2% in the month. Following a modest increase in March (+0.8%), sales in Clothing and Footwear fell by 5.8% in April. Although anecdotal evidence points to the increasing reluctance of Irish consumers to spend on the High-Street, such a sharp fall-off in April was surprising, and we would expect to observe a partial rebound next month.
In coming months, we will see a further deterioration in the labour market, rising prices will continue eat into household incomes, and consumer sentiment will remain depressed. That is, we do not expect that the factors causing weak retail sales volumes so far in the year will subside any time soon, and therefore the risks to our 2% consumer spending forecast for 2008 remain on the downside.