Source: CSO

The volume of Irish retail sales (i.e. excluding price effects) decreased by 15.4% in May 2009 compared to May 2008. There was a monthly decrease of 1.2%. If Motor Trades are excluded the volume of retail sales decreased by 9.2% in May 2009 compared to May 2008 and the monthly change was -1.3%, according to the CSO. The monthly fall followed a plunge in prices.

The value of retail sales decreased by 19.4% in May 2009 compared to May 2008 and decreased by 1.4% in the month. However, if Motor Trades are excluded, the annual decrease was 13.6% and the monthly change was -1.6%.

All sectors contributed to the May 2009 year-on-year decline in the volume of retail sales with the most significant being:

• Motor Trades down 39.8%
• Non-Specialised Stores (NSS) down 4.7%
• Bars down 11.4%
• Fuel down 11.2%
• Clothing, Footwear & Textiles down 17.1%
• Household Equipment down 22.0%

The NSS sector is the largest single component of retail sales in May 2009 contributing over one third to the overall retail figure. The NSS sector includes supermarkets.

Retail Ireland expresses concern at impact of budget on retail sales

Director of Retail Ireland Torlach Denihan said: “The supplementary budget affected consumers’ May pay packets and we are seeing the impact now in the May retail sales data, released today. Consumers responded to the fall in their disposable incomes by spending 17% less on clothing compared to the same period last year.

"Sales of electrical goods, furniture and other items linked to the property market have been down by double digit percentages for several months and clothing sales are now suffering similarly. Consumers are pulling back from discretionary purchases.

“We project that 25,000 more retail staff will go on the Live Register this year, as a result of consumer spending falling by about 9%. This is due to the impact of the two budgets, cross-border shopping and the recession generally.

“Retail Ireland calls for a pro-active policy response from Government.

"Government should:

•  reduce VAT to 18% for a specific period to stimulate retail sales;
• facilitate retailers in their attempts to bring best value to the consumer by sourcing goods from the most efficient and lowest cost suppliers;
• cut state-controlled costs on the retail sector, such as commercial rates, waste disposal and electricity;
• reduce the regulatory burden on retailers;
•  reduce the excise levels on alcohol because alcohol is the single biggest motivation for cross border shopping trips.”

Goodbody chief economist Dermot O'Leary commented:

Core sales still declining...- While the dramatic decline in retail sales volumes seen in Q1 has dissipated, this was expected after the record collapse in car sales in the opening months of the year; total retail sales were down 15% yoy in May, relative to -27% yoy in January. A more useful guide of consumer spending trends excludes this volatile component. In this regard, the signs are still relatively poor, with sales volumes falling by another 1.3% mom in May, bringing the annual decline to -9.2%.

...with no area immune - No area of retail sales has escaped the consumer spending reduction, with the housing-related categories continuing to suffer more than most. For example, our proxy for DIY sales - Hardware, Paint and Glass - experienced a 27% yoy decline in sales volumes in May (-18% yoy in April), while sales of electrical goods fell by 31% yoy (-40% yoy in April). The recent Q1 National Accounts revealed that spending on RMI (Repair, maintenance, improvement) activity held up well relative to the new housing sector. However, the fall in DIY activity is a victim of the still anaemic level of house transactions and households’ preference to save more.

Non-essentials being scaled back - Discretionary purchases, such as clothing, are now also falling sharply after holding up relatively well previously. In May, the volume of sales of textiles and clothing fell by 17% yoy (-10% yoy in April). This is despite a slashing of prices by these retailers; in May, we calculate that prices fell by 11% yoy in this category.

...despite slashed prices - While the CPI index has already confirmed that Ireland is in a deflationary environment, the retail sales provide interesting detail as to where the most acute deflationary tendencies exist. Within the different categories of the retail sales index, there are only two that have not seen price declines over the past year (books, newspapers etc and bars).

Labour market decline has eased, but pressures remain on households - There have been some recent evidence that the pace of decline in the labour market has troughed and even consumer confidence perked up last month. However, the pressures on household finances from job losses and after-tax pay reductions are still very substantial. We would be comfortable with our call that consumer spending will decline by 9% in 2009 at this stage, with a further fall of 6.5% in 2010.

Davy chief economist Rossa White commented:

Spending continued to slide in May, before full impact of Budget on pay packets

• Irish retail sector continued to suffer in May; 'core' sales down for four of the five months this year
• Irish retail sales fell 1.2% in volume and 1.4% in value in May. The most reliable and stable series strips out garage sales (excluding car sales, fuel etc.). Sales ex-garages fell 1.3% in volume compared with April, and 1.6% in value.
• Looking at the trend this year, retail sales (ex-garages) are down 4.5% in volume since December. In value, sales (ex-garages) have dropped 7% since the end of last year. The gap between the cash value and volume decline shows how savage price cuts are in retail.
• Unfortunately, sales ex-garages have declined month-on-month in four of the five months this year for which data are available — and in all of the last three. The data have been revised downwards: e.g. the figures previously showed a volume increase of 0.6% ex-garages in
• April; these now show a decline of 0.7%.

Retailers' margins being eroded, albeit that margins for many were probably wide entering the recession

• In recent months, we have noted that price discounting has been heavy and showing little signs of letting up. There were a few notable examples again in May. Take pharmaceutical and medical products where volumes fell 0.6%, but the cash value fell 3.7%. Or furniture and lighting: volumes slid 2.4% but the cash value dropped 3.4% compared with April.
• Many retailers entered the crisis with fat margins, but those margins have been significantly eroded.

Retail sales volume to decline at slower pace in H2

• We expect retail sales volumes to contract more slowly in H2. Note that the jobs market is now deteriorating steadily rather than precipitously. The savings ratio has already spiked and will begin to stabilise.