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News : Irish Economy Last Updated: Jan 1, 2011 - 7:31 AM

Irish retail sales volume increased by 0.9% in November 2010 compared with November 2009
By Finfacts Team
Dec 23, 2010 - 2:56 PM

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Source: CSO

The volume of retail sales (i.e. excluding price effects) increased by 0.9% in November 2010 when compared with November 2009 and there was a monthly increase of 0.2%, the Central Statistics Office said today.

If Motor Trades, which in 2010 were boosted by a publicly subsidised scrappage scheme, are excluded, the volume of retail sales decreased by 0.9% in November 2010 when compared with November 2009, while there was a monthly decrease of 0.2%.

Motors (+14.9%), Non-Specialised Stores (+1.5%) and Clothing, Footwear & Textiles (+5.1%) were amongst the five categories that showed year-on-year increases in the volume of retail sales this month. Furniture and Lighting (-9.7%), Books, Newspapers & Stationery (-10.9%) and Bars (-11.4%) were amongst the eight categories that showed annual declines. Month-on-month declines in the volume of retail sales were evident in seven of the categories while six categories showed monthly increases in November 2010.

The value of retail sales decreased by 1.1% in November 2010 when compared with November 2009 and there was a month-on-month change of -0.1%. If Motor Trades are excluded, there was an annual decrease of 1.9% in the value of retail sales and a monthly decrease of 0.4%.

Motors (+9.0%), Non-Specialised Stores (+0.4%) and Department Stores (+8.0%) were the only categories that showed year-on-year increases in the value of retail sales. The other ten categories showed year on year declines in the value of retail sales.

Davy Research economist, Conall MacCoille, commented:

Volume of retail sales rose 0.2% in November but fell 0.2% excluding motor trades

  • The volume of retail sales rose by 0.2% on the month in November following a rise of 0.3% in October. In annual terms, this means that the volume of retail sales increased by 0.9% in November.

  • However, excluding motor trades, the volume of retail sales fell by 0.2% on the month in November and by 0.9% in the year to November.

  • The value of retail sales fell by 0.1% on the month in November and declined by 1.1% in the year to November.

Level of retail sales continues to stabilize but cannot be taken as firm evidence of a rebound in Irish consumer spending

  • At best, today’s retail sales release can be interpreted as indicating that the level of retail sales continues to stabilize in the fourth quarter.

  • But this is not particularly encouraging news once the impact of motor trades is excluded or when the percentage changes in nominal terms are considered. In addition, we also have to see if there is any impact from the bad weather in December.

  • It is also worth remembering that the national accounts release last week indicated that overall consumer spending contracted by 1.3% in Q3, although the volume of retail sales expanded by 0.3% over the same period. So today’s retail sales numbers cannot be taken as firm evidence of a rebound in consumer spending in the fourth quarter.

Ulster Bank economists Simon Barry and Lynsey Clemenger commented:

First back-to-back monthly increase in total retail sales since March/April

November retail sales figures show a second consecutive monthly increase in sales volumes. The 0.2% rise last month followed a 0.3% monthly gain in October, representing the first back-to-back monthly increases since March/April. This leaves total sales in October/November running some 0.4% above the average level seen in the third quarter.

As has been the case for much of the year, the overall picture is being flattered somewhat by rising levels of car sales. This was a pattern that was again evident last month, according to the CSO, as the motor trade category posted a 0.4% monthly rise in sales volumes. While modest by the standards of the stronger increases in car sales earlier in the year, this was still enough to pull total sales higher in November as core sales (which strips out the motor trade) fell by 0.2% on the month. This 0.2% fall in underlying sales followed a flat reading in October to leave core sales running about 0.5% lower than their average level in the September quarter.

Broad based, but not universal, declines in retail categories in November

Looking at a more detailed breakdown of retail sales trends in November, weakness in the month was reasonably broad-based with seven of the twelve core categories recording a monthly decrease in sales volumes. Bar sales were particularly weak, falling by 4.6% from October, which took the level of sales to its lowest in the current downturn. The same was also true for furniture and lighting and books, newspapers and stationary, where sales volumes decreased by a further 2.2% and 2.1% respectively.

However, it is also important to point out that the weakness in retail sales in November was not universal. In addition to motor trades, five of the other retail categories showed modest increases in sales volumes in the month. These included electrical goods (+1.3% m/m) and other retail sales (+1.0% m/m). The latter category includes items such as toys, jewellery and mobile phones; therefore, it is not surprising to see some improvement in sales here in the run up to Christmas. Food sales also rose in the month, albeit that the modest 0.5% rise was not enough to offset the 1.6% drop in October.

Overall, core sales still under pressure but could have been an awful lot worse

Overall, the November retail sales report was a mixed bag as further increases in motor trades mask a weaker underlying performance in consumer spending. Core sales look to be headed for another quarterly decline in Q4, especially given the likelihood if not inevitability of a weak December for retailers. Notably, the survey cut-off date for the November figures was the 27th, just before the really severe weather struck at the tail end of the month. With the country experiencing an extended cold snap, a discernible weather impact is likely to appear in next month’s numbers, not to mention the drag from both the Budget and the negative newsflow around the IMF/EU support package. And yet, the reality is that the latest retail figures could have been an awful lot worse. In particular, the plunge in confidence recorded by the KBC/ESRI consumer sentiment index in September and October had pointed to the possibility of a correspondingly sharp pull back in actual spending patterns. However, while underlying spending clearly remains soft, that risk has not materialised, thus far at least.

Retail Ireland director Torlach Denihan of the the IBEC group that represents the retail sector, said: "Core retail sales (excluding cars and bars) held up reasonably well in November despite the extraordinary developments when Ireland sought support from the IMF and EU. There may be some grounds to hope that the retail sector is close to the bottom.

"While it is difficult to predict figures for December, it seems that there will be a 5% annual fall in the value of core retail sales (excluding cars and bars) in 2010 and a 2% annual fall in volume. This will be the third year in a row in which core retail sales have fallen.

"In view of the protracted difficult trading conditions it is unrealistic for the Retail Joint Labour Committee to insist that pay rates be increased in January and this decision should be reversed to preserve employment. Landlords and their banks must reverse all rent increases under the last rent review to reflect the decline in retail sales and the property market since that review took place.

"On a positive note, despite the weather shops remain open for business today and virtually all deliveries are getting through. There is almost full availability of products and extended opening hours to facilitate the public in preparing for Christmas."

Retail Excellence Ireland (REI), another industry group,  today warned that December 2010 will be the weakest period of trading in recent history. Following significant blows to the retail industry including IMF intervention, budget 2011 and abject consumer sentiment, the arrival of the adverse weather has decimated consumer activity and purchasing.

Commenting today David Fitzsimons Chief Executive, Retail Excellence Ireland said: “The retail industry has been hit with the perfect storm in recent weeks. If IMF intervention and a very severe budget were not enough, the arrival of arctic conditions has minimised shopping activity and has left many of the largest destination shopping centres and cities near empty.

While regional retailers have been negatively impacted due to reduced shopper activity they have also gained as customers stay local. Retailers who are in the worst distress are those who are in the primary shopping centres and retail park locations with Dublin hit very severely.

These schemes are dependant on custom from a wide radius and charge rent based on significant footfall levels. The footfall has stayed away from these locations due to the adverse weather.”

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