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News : Irish Last Updated: Apr 24, 2009 - 5:31:05 PM

Irish Retail Sales volume plunges by 5.2% in year to June
By Finfacts Team
Aug 22, 2008 - 11:48:51 AM

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Source: CSO

The CSO said today that the volume of retail sales (i.e. excluding price effects) decreased by 5.2% in June 2008 compared to June 2007. There was a monthly decrease of 0.7%. If Motor Trades are excluded there was an annual decrease of 1.8% and the monthly change was -1.9%.

The value of retail sales decreased by 1.8% in June 2008 compared to June 2007 and decreased by 0.4% in the month. However, if Motor Trades are excluded, the annual increase was 1.9% and the monthly change was -1.7%.

May 2008 is the latest month for which final detailed figures are available. The three-month March 2008 – May 2008 volume figures show that, compared with the three months ending February 2008

All sectors declined with the largest decrease in the volume of sales in the Electrical Goods (-10.1%) sector.

Lynsey Clemenger, economist at Ulster Bank commented: "The latest retail sales figures for June add to an already dismal week for Irish economic news-flow, which has seen the confirmation of a marked deterioration in the labour market in Q1, and weak external trade figures that cast a shadow of Ireland’s export performance in 2008.

Retail sales fell by 0.7% month-on-month (mom) in June, and marked the fifth consecutive monthly decline. This weakness was driven by poor sales across a broad array of categories including Motor Trades (-3.3%), Department Stores (-7.9%), Bars (-2.4%) and Household Goods (-1.9%). In annual terms, sales are now down 5.2% on June 2007, the worst performance since January 1987.

We now have data for the first half of the year, which show total retail sales down 2.3% on the corresponding period in 2007, and core retail sales (excluding cars) down a more moderate 0.1%. However, the quarterly figures present a much bleaker picture, with Q2 sales down 3.8% on Q1, and down 4.5% on Q2 2007.
Poor motor sales have been the main source of the downward trend in retail sales in the year so far. Although sales fell by 3.3% mom in June, this was an improved performance on some of the preceding months (-6.5% in May). However, the June figure was likely boosted by forecourt sales and repairs, which are also included in the motor trades figure.

Nevertheless, sales in the motor category were down 14.2% in annual terms in June. A combination of factors have been driving this decline, including uncertainty over the government’s tax changes, increases in petrol and diesel costs, and rising food and mortgage costs that are working to sap household disposable incomes.

Also becoming increasingly evident as the year progresses is the sharp decline in sales in housing-related categories. In Q2 sales of Furniture and Lighting fell by 10.9% on the same period in 2007, sales of sales of Electrical Goods were down by 10.8% and sales of Hardware Paints and Glass fell by 5.3%. Given the ongoing weakness in the construction sector, and the forecast low level of completions for coming years, poor sales volumes of housing-related goods can be expected to continue in coming months.

Bars remain one of the worst performing categories. June was another weak month (-2.4% mom), and sales in the second quarter were down 5% on 2007 levels. On a more positive note, the Clothing and Footwear category has been holding up reasonably well, with sales for the first half of the year up 1.1% on the same period in 2007. However, given that the summer sales were brought forward, in addition to anecdotal evidence from retailers of reduced footfall numbers, this category will likely perform poorly in coming months also.

Although the falloff in sales in the motor category has been the primary source of the sharp deterioration in retail sales in 2008 so far, the increasingly muted spending across the majority of spending categories cannot be overlooked.

Retail sales make up approximately 50% of total consumer spending, and therefore only tell part of the picture. In the first quarter of 2008 total consumer spending rose by 3.5%, as buoyant spending on services offset the weakness in retail sales. From today’s figures, we know that retail sales in Q2 were considerably weaker than in Q1. Given that it is hard to conceive any reason why services spending will remain robust in Q2 (and indeed in the quarters thereafter), it is almost certain we will observe a considerably weaker level of consumer spending when the Q2 National Accounts data are released in September.

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. At this stage, the risks to our 1.5% consumer spending forecast for 2008 are skewed firmly to the downside."

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