Source: CSO

The volume of retail sales (i.e. excluding price effects) increased by 6.0% in April 2010 compared to April 2009 and there was a monthly increase of 1.8% according to the Central Statistics Office.

 If Motor Trades are excluded the volume of retail sales increased by 0.3% in April 2010 compared to April 2009 and the monthly change was -0.2%. This is the first year-on-year increase in the volume of retail sales (excluding motor trades) since March 2008. A majority of sectors showed year on year volume increases with the mostsignificant being: 1) Motor Trades up 35.4% 2) Non Specialised stores up 3.1% 3) Clothing, Footwear and Textiles up 10.8%.

Goodbody economist Deirdre Ryan commented: "The value of retail sales increased by 1.6% in April 2010 compared to April 2009 and there was a monthly increase of 0.7%. This is the first year-on-year increase in the value of retail sales since February 2008. However, if Motor Trades are excluded, there was an annual decrease of 3.6% and the monthly change was -0.2%.

Strong start to Q2 for retail spending - On an annual basis headline sales volumes grew 6% yoy in April (+3.5% yoy in March), the strongest rate of growth since September 2007. Total sales grew 1.8% monthly, while core sales dropped modestly in April, by 0.2%, although this came after a very strong March when core sale volumes bounced by 1.8%.

Not just about car sales - Furthermore, with annual core sales growth now in positive territory for the first time since April 2008, this indicates that although motor trades have been especially strong in the opening months of the year, this is not the whole story either. Core sales volumes are ahead 2.5% in the first four months of 2010, while of the thirteen retail categories in today’s release, spending in volume terms was ahead in nine of those on an annual basis in April.

Early days, but potential upside risks to full year forecast These data feed into our view of continuing recovery in the consumer spending area of the economy. With consumer confidence sitting at two and a half year highs, the background to consumer spending has stabilised somewhat. Savings ratios are reducing although the major drag remains falling employment and we will get the latest update on this issue next week with the release of Q1 labour market data.

Q1 GDP data (due for release later this month) will likely reveal spending growth in Q1, although this will be largely owing to strong car sales combined with very favourable base effects. However, should the outturn in relation to services spending prove stronger than expected or the rate of employment decline slow more quickly than expected, these factors, coupled with today’s data may suggest a flat spending outturn for the full year as our current forecast estimates is overly conservative."

Commenting on the data, IBEC economist Reetta Suonperä said: “Headline retail sales grew by 6.0% in the year to April, largely thanks to continuing strong car sales. The good news, however, is that the recovery in sales is becoming more broad based. Core retail sales (excluding cars, fuel and bars) increased by 1.3% in the month and annual growth accelerated to 3.9%. Many retail sectors, including electrical goods, clothing and footwear, and furniture and lighting, are now growing year-on-year, albeit coming off a very low base.

“The latest retail figures are a further indication that the more positive news on the real economy we’ve had this year, together with no tax hikes in last December’s Budget, are feeding into consumer behaviour. While we by no means foresee a return to the very high consumer spending growth experienced before the crisis, it is encouraging that people are easing up on precautionary savings, which were at a very high level in 2009.

“The recent turmoil in the euro area and the rollout of fiscal austerity measures across the region, however, pose downside risks to the recovery,” concluded Suonperä.

Simon Barry, chief economist, Ulster Bank commented:

Ex-motors retailing continues to show signs of recovery as annual growth turns positive for the first time in over two years…

"Another strong month for car sales was the main driver behind a 1.8% monthly increase in the volume of total Irish retail sales in April. Sales volumes in businesses in the Motor Trade jumped by a further 5.9% in April to take the annual rate of increase to over 35%, according to the CSO. This is a dramatic turnaround from a year earlier when sales were plunging at an annual pace in excess of 50%, helped by the stimulus provided by the Government’s scrappage scheme, as well as some underlying recovery from extremely depressed levels.

The recent strength of car sales has been well-documented of course. Indeed, industry sources point to another strong month in May which should feed through into next month’s report from the CSO. For this reason, our focus in recent releases of the retail sales report has been on trends in retailing outside the motor trades area.

On an ex-motors basis, sales volumes recorded a small monthly decline of 0.2% in April. This was a slightly disappointing outcome as it followed three consecutive monthly increases. However, two considerations lead us to play down the significance of the slippage in April.

First, there was a reasonably large upward revision to the previous months’ data, thus providing some offset to the news of a small fall in April. For example, the estimated level of sales in March is now actually 0.9% higher than that contained in last month’s report. This means that the quarterly increase in Q1 is now also higher, at 1.3% on these latest numbers vs. the 1.1% reported a month ago.

Second, even after the April decline, the momentum effect for the second quarter is positive. By this we mean that the level of sales in April is running above the Q1 average level - by about 1% in fact – thus suggesting that ex-motor trades retailing looks set to record a second quarterly increase.

It is also worth highlighting that the April report shows the first year-on-year increase in ex-motors retail sales volumes since March 2008 – a significant improvement from the record decline of 8.9% recorded in May of last year.

Our overall take on these latest numbers is that they are consistent with ongoing, if modest, improvement in underlying consumer spending trends. This is a pattern that has its origins in a gradual improvement in consumer confidence, which in turn is translating into less precautionary saving among Irish households as they sense that the overall economic environment is beginning to show improvement."