Source: CSO

Irish consumer spending rose in March and retail sales volume increased, according to the latest Central Statistic Office (CSO) figures.

The volume of retail sales (i.e. excluding price effects) increased by 3.6% in March 2010 compared to March 2009 and there was a monthly increase of 2.6%. If Motor Trades are excluded the volume of retail sales decreased by 1.2% in March 2010 compared to March 2009 and the monthly change was +0.6%. A majority of sectors showed year on year volume increases with the most significant being: 1) Motor Trades up 21.9% 2) Non-specialised stores up 0.1% 3) Other Retail Sales up 8.4%.

The value of retail sales decreased by 1.6% in March 2010 compared to March 2009 and there was a monthly increase of 2.2%. However, if Motor Trades are excluded, the annual decrease was 5.3% and the monthly change was +0.7%.

Provisional estimates are now available for the first quarter of 2010 and these figures show the volume of retail sales increased 1.1% year on year and the value of retail sales declined by 3.6% year on year.

If Motor Trades are excluded the volume of retail sales decreased by 2.9% year on year in the first quarter of 2010 and the value of retail sales declined by 6.9% in the first quarter.

NCB Stockbrokers economist, Brian Devine, commented:

Best week for Irish data in a long time

Retail sales were up 2.6% m/m in March and increased on an annual basis by 3.6%. Motor trades sales slipped marginally on the month, but remain well ahead of last years levels.

Retail sales ex. Motors also rose on a m/m basis, +0.6%, to leave the annual rate at -1.2% (Chart 1). Furniture & Lighting, enjoyed a solid bounce in February, +9.3% m/m, as did Hardware, Paints and Glass businesses, + 6.1% m/m.

The Live Register fell by 500 persons in April and the standardized unemployment rate remained unchanged at 13.4% for the fourth month in a row.

The problem with the Live Register data is that it is stock data not flow data. So the decrease of 500 persons could be composed of 500 leaving or 15,300 new additions and 15,800 persons leaving the register. This makes it hard to decipher exactly what is driving the unemployment number.

The unemployment rate is influenced not only by job losses but also by the natural increase in the population of working age who are looking for work. If there is insufficient work for the latter group then the unemployment rate rises. Emigration can also influence the unemployment rate. In short, we expect the unemployment rate to rise a further percent to peak at 13.8%. The emigration valve caps the rise in the unemployment rate stemming from job losses and lack of employment opportunities.

Nonetheless, this has been the best week for a long time on the Irish economy data front with both NCB PMIs also having breached the 50 mark in April. The economy is clearly on the road to recovery and we expect it to grow sequentially from this point forward in 2010 and for GNP to average -0.5% in 2010 before growing by 2.8% in 2011.

Greek financial contagion worries are dampening the mood a bit. The yield on the 2 year note has surged towards 19% again today and the Portuguese CDS term structure is becoming more steeply inverted. Spain with €560bn in outstanding government debt at the end of 2009 and a much larger economy than Greece, Portugal or Ireland is the real worry in terms of contagion. Its 2 year yield has moved out considerably but still remains below 3%. We think the EU/IMF deal should by time for Greece to pass the required measures and avoids, temporarily at least, the possibility of a debt restructuring. The events in Greece over the last couple of weeks have been a wake up call for all of Europe. Decisive action is required on fiscal deficits and decisive swift coordinated action is required by Euro area leaders when facing a crisis.

Ireland has turned the corner towards growth and we believe that contagion will not spread to harm the recovery, but we remain vigilant to that possibility. In fact, the weakness in the Euro benefits Ireland more than any other economy in the Euro area. It’s just a pity about the lack of clarity in the UK, but still the boost is significant. It should be clear to the Government that the job with respect to fiscal consolidation is far from done. Remember €2bn needs to be found in tax/expenditure in Budgets 2011 and 2012. Should clarity and decisiveness about tax/expenditure policy become clouded in the future, Ireland could be disposed of its throne as the poster boy of fiscal consolidation and funding costs could rise again. For the moment though, things are looking much better in Ireland.