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News : Irish Economy Last Updated: Feb 28, 2014 - 3:05 PM


Irish Economy 2014: Retail sales rose 8.9% in 12 moths to January boosted by car sales
By Finfacts Team
Feb 28, 2014 - 3:01 PM

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Irish Economy 2014: The volume of retail sales (i.e. excluding price effects) in January 2014 increased by 2.3% when compared with December 2013 and there was an increase of 8.9% in the annual figure. If Motor Trades are excluded there was an decrease of 1.0% in the volume of retail sales in January 2014 when compared with December 2013 and there was an increase of 2.7% in the annual figure.

The CSO said that the sectors with the largest month on month volume increases were Motor Trades (+6.3%), Other Retail Sales (+1.5%) and Furniture & Lighting (+0.8%). The sectors with the largest monthly decreases were Department Stores (-4.6%), Pharmaceuticals Medical & Cosmetic Articles (-4.1%) and Books, Newspapers and Stationery (-3.7%).

There was an increase of 1.8% in the value of retail sales in January 2014 when compared with December 2013 and there was an annual increase of 6.9% when compared with January 2013. If Motor Trades are excluded, there was a monthly decrease of 0.3% in the value of retail sales and an annual increase of 0.9%.

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Colm Mac Coille of Davy commented - - "The volume of retail sales (i.e. excluding price effects) in January 2014 increased by 2.3% when compared with December 2013 and there was an increase of 8.9% in the annual figure.

If Motor Trades are excluded there was an decrease of 1.0% in the volume of retail sales in January 2014 when compared with December 2013 and there was an increase of 2.7% in the annual figure.

The sectors with the largest month on month volume increases were Motor Trades (+6.3%), Other Retail Sales (+1.5%) and Furniture & Lighting (+0.8%). The sectors with the largest monthly decreases were Department Stores (-4.6%), Pharmaceuticals Medical & Cosmetic Articles (-4.1%) and Books, Newspapers and Stationery (-3.7%).

There was an increase of 1.8% in the value of retail sales in January 2014 when compared with December 2013 and there was an annual increase of 6.9% when compared with January 2013. If Motor Trades are excluded, there was a monthly decrease of 0.3% in the value of retail sales and an annual increase of 0.9%.

Today’s retail sales figures show volumes up 2.3% on the month and 8.9% in the year to January 2014. These are exceptionally strong figures – the highest annual growth since May 2007. However, excluding the volatile motor trades sector, sales fell by 1% on the month but were still up by a robust 2.7% on the year. So the underlying picture is that consumer spending continues to strengthen, albeit not as spectacularly as the headline 8.9% growth suggests.

The big news is that car sales have pushed up sharply on retail spending at the start of 2014. Motor trades were up by a massive 28.8% compared with January 2013. This is not too surprising. New private cars licensed for the first time were up 48.8% in January. Moreover, consumer confidence surged as Ireland approached the EU/IMF bailout exit. Within these confidence surveys, Irish households indicated that they were far more likely to spend on big-ticket items, including cars. Indeed, sales of furniture and lighting were up by 11.2% in the year to January and electrical goods by 9.1%.

That said, excluding motor trades, retail sales volumes fell by 1.0% on the month in January, following the 1.7% rise in December, but were still up 2.7% on the year. Today’s data follow the news last month that the Christmas trading season was the best in five years, with sales up 3% in the year to December. Furthermore, retail spending strengthened through 2013, up 0.9% and 1.3% in Q3 and Q4 respectively.

Jobs growth remains the key driver of consumer spending. Labour market data released this week showed employment growth accelerating to 3.3% in Q4 2013 but with wages broadly flat through the year. Furthermore, disposable incomes have remained under pressure from the tax and spending measures contained in Budget 2014. Indeed, the household savings ratio fell to 8.3% in Q3 2013, down from double-digit levels in 2012. So although the 0.8% growth in retail sales (ex-motors) in 2013 was the first calendar year of growth since the recession began, it was in part sustained by a reduction in household saving.

Looking forward to 2014, employment growth looks set to accelerate from 2.4% in 2013 to close to 3%. Also, the €2.5bn adjustment contained in Budget 2014 is smaller than in previous years, and some of the revenue measures such as the bank levy and stamp duty rate on private pensions will not affect household incomes directly. Hence, we expect consumer spending to rise by 1.5% in 2014. However, the exceptionally strong labour market data and the surge in car sales in January certainly point to upside risks to our 1.5% forecast."

Juliet Tennent of Goodbody commented -- "Motor trades drive 8.9% yoy increase in retail sales: Irish retail sales put in a very impressive performance in January with the headline rate growing by 2.3% mom and 8.9% yoy. However, much of this can be attributed to motor trades, with core retail sales falling 1% mom. This follows a strong performance in core sales in the final two months of 2013 which saw volume grow by 1.2% mom in November and 1.7% mom in December. On an annual basis core retail sales increased by 2.7%.

Property market recovery having a positive impact: Unsurprisingly, motor trades was the best performing category, rising by 29% yoy in volume terms and confirming earlier reports that car sales had a strong start to 2014. Aside from this, the best performing categories were Department Stores (+8.6% yoy, Furniture & lighting (+11% yoy), Electrical Goods (+9% yoy) and Hardware, Paints & Glass (+5% yoy). Clearly, the pick-up in activity in the housing market (transactions grew by +7% yoy in January) is having a positive impact on housing related categories.

Weakness persists in certain sectors: Weakness persists in a number of categories. Books, Newspapers & Stationary saw volumes fall by 6% yoy, while Pharmaceuticals & cosmetics and Food, Beverage & Tobacco both saw volumes fall by c.3% yoy. Bar sales also continue to struggle with volumes rising by 0.4% yoy as increases in prices, thanks mainly to additional excise duty, are acting as a headwind.

Irish consumer looking for value?: On the negative side, the value data indicates that much of the volume growth is being achieved through discounting, indicating that pricing power for retailers remains weak. The implied deflator for core sales, which has been in negative territory since August 2008, was -1.8% in January. Retail sectors where some inflation is evident (Books & Stationary & Bars) are struggling to make volume gains, suggesting that consumers are being influenced by value.

Expect a weak recovery in consumer spending in 2014: Positive trends in employment and the property market (confirmed by yesterday’s data releases on both) coupled with the exit of the Troika continue to have a positive impact on consumer confidence. However, data also released this week; show that earnings continued to fall in Q4 2013 (although falling interest rates will counterbalance some of this). In addition, the high level of debt that Irish households are carrying will curb consumer spending over the coming years. While we remain cautious on the consumer, there may be upside risks to our 1% consumer spending growth forecast for 2014.

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