Source: CSO

The volume of Irish retail sales (i.e. excluding price effects) decreased by 4.8% in January 2010 compared to January 2009. There was a monthly decrease of 17.3%. If Motor Trades are excluded the volume of retail sales decreased by 4.7% in January 2010 compared to January 2009 and the monthly change was +0.1%, according to the CSO.

The value of retail sales decreased by 8.4% in January 2010 compared to January 2009 and there was a monthly decrease of 15.6%. However, if Motor Trades are excluded, the annual decrease was 8.3% and the monthly change was +0.6%. However, Non Specialised stores, which includes supermarkets, show a year on year increase of 0.6%.

Retail Ireland, the IBEC group that represents the Irish retail sector, today said that new CSO retail sales figures show the sector continues to face a very negative trading environment. Retail Ireland director Torlach Denihan said: "The value of core retail sales, excluding car, fuel and bar sales, declined by an annual 8.5% in January. The rate of decline has slowed somewhat after the freefall in 2009, but unfortunately the downward trend reflects the weak consumer sentiment figures released yesterday. Sales continue to fall and retailers continue to cut prices.

"A major problem for retailers is that Ireland is a very expensive place to do business. Only when we bring down our costs to those of other European countries will we avoid the current regrettable situation where retailers are forced to close shops and reduce staffing levels. Rents in particular have not been reduced and in some cases are being increased under upward only rent review clauses.

"Retail Ireland urges the Government to urgently reform the arbitration process and build on the decision to ban upward only rent reviews in new leases by extending the ban to existing leases. Unless there is action in these areas, many more retail staff will join the 30,000 retailer employees who ended up on the Live Register in 2009," concluded Denihan.

The CSO said the majority of sectors showed year on year volume declines with the most significant declines being:

• Motor Trades down 4.5%

• Pharmaceutical Medical and Cosmetic Articles down 2.0%

• Clothing Footwear and Textiles down 4.2%

• Bars down 9.9%

• Other Retail Sales down 11.7%

Dermot O’Leary, chief economist Goodbody Stockbrokers, commented: "Today’s reports provide evidence that after the collapse seen twelve month ago, consumer and labour market trends are stabilising, albeit at very low levels.

Headwinds have not gone away - A number of factors feed into consumer spending plans, including employment trends mentioned below, earnings, taxes and savings. All of these issues have provided a negative for Irish consumers in the past eighteen months, and the latest retail sales numbers suggest that consumer spending trends have yet to bottom in the Irish economy, albeit the collapse seen twelve months ago is unlikely to be repeated.

Core sales down 13% from peak...- The least volatile spending trends can be gleamed from sales excluding the motor trade; in January, core sales volumes increased by 0.1% mom, while the annual rate of decline improved from -6.4% to -4.7% due the large drop seen last January at the height of the financial and fiscal crisis in Ireland. This is a very modest increase in the scheme of things and still leaves core retail sales volumes down by 13% from the peak of October 2007.

...while retailers have to deal with stubbornly high costs - To gauge the climate that businesses are facing, it is better to look at the value of sales, rather than volumes. While input costs have been falling for some businesses, wages in the retail sector are probably little changed, while the high-profile closures of some retail premises recently shows the strain that fixed, or in some cases, rising, rents are having on the sector. The value of core sales rose by 0.6% for the second consecutive month in January, with the core deflator improving from -5.6% to -3.8% over that period. Nevertheless, revenues are still down by 17% from the peak. It is difficult to see how other retailers will continue to survive if some flexibility on their costs.

Live Register down 2,300 in February - The total number of people on the Live Register (claiming unemployment benefit) fell by 2,300 in February 2010, indicating that January’s increase of 5,300 was likely due to post-Christmas layoffs, a theme that was also evident in 2009.

Unemployment rate down for first time in three years - For the first time in three years, the unemployment rate fell (from 12.7% to 12.6%). This may be due to a number of factors, including a better jobs performance, increased numbers switching from unemployment to education or increased migration, the latter two of which have the effect of removing those people from the unemployment statistics. Labour force developments will be critical in determining the peak in the unemployment rate. We are currently estimating that the unemployment rate will peak at 14%, but the more recent statistics suggest that this is too pessimistic."

Ulster Bank economist Lynsey Clemenger commented: "Total retail sales figures continue to be heavily skewed by motor trades, while core sales showed the consumer entered 2010 on a slightly firmer footing…We were initially slightly taken aback by the large 17.3% monthly decline in total retail sales volumes in January, especially as it is not too far from the unprecedented 19.5% drop recorded in January of last year. However, there are some plausible explanations. As was the case in January 2009, seasonal factors contributed to the huge 36% monthly fall in motor trades, which in turn was the primary driver of the large fall in total retail sales. In addition, there are timing issues associated with the period covered by the January retail sales numbers. The release covers the period from the 27th of December to the 23rd of January. Therefore, it misses out on the selling period in the final week of January, in which industry sources noted an improvement in car sales (and in sales in other retail sectors) following the period of unseasonably cold weather conditions earlier in the month. Indeed, we would expect to observe some reversal of the January decline in motor trades in the months ahead, with the SIMI new car registrations figures for February showing a promising 40% rise on the same month in 2009.

With the monthly trend in total retail sales heavily distorted by the decline in the motors category, it is useful to look at what happened to the annual rate. On this basis, there was a further easing in the decline in total retail sales in January. Core retail sales, our preferred measure for gauging the underlying trend, also showed a deceleration in the annual rate of decrease. On a monthly basis, core sales volumes showed a small monthly rise of 0.1%, the first increase since September of last year. This is consistent with the idea that the consumer entered 2010 on a slightly more stable footing. However, as the January index of core retail sales was below the Q4 2009 average and as 9 out of the 12 core retail categories posted monthly declines, the improvement was a modest one."

SEE: Finfacts report: Irish Live Register fell 2,300 to 432,400 in February 2010 likely reflecting emigration